USD/CNH still faces downside risks – UOB

FX Strategists at UOB Group still believe USD/CNH could edge lower to the 6.80 region in the next weeks.

Key Quotes

24-hour view: “Our expectation for USD to ‘test the 6.8530 resistance’ last Friday did not materialize as it eased off from a high of 6.8499 before trading mostly sideways. The underlying tone has softened but any weakness from here is viewed as a lower trading range of 6.8250/6.8450 (a sustained decline below 6.8250 is not expected).”

Next 1-3 weeks: “Our latest narrative was from last Wednesday (02 Sep, spot at 6.8355) wherein ‘oversold short-term conditions could lead to consolidation first but overall risk is for further USD weakness towards 6.8000’. Our view was not wrong as USD traded in a relatively quiet manner for the past few days. While downward momentum has eased somewhat, the negative phase in USD that started in mid-August still has chance to push lower towards the round-number support level of 6.8000. Only a move above 6.8800 (no change in ‘strong resistance’ level) would indicate the negative phase in USD has run its course.”