USD/CNH: Extra retracements likely below 7.2700 – UOB
USD/CNH should accelerate its losses on a breakdown of 7.2700, comment UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia.
Key Quotes
24-hour view: We did not expect USD to plummet to a low of 7.2861 last Friday (we were expecting it to trade in a range). While the outsized decline appears to be overextended, USD could drop to 7.2800 first before stabilisation is likely. The next support at 7.2700 is unlikely to come under threat today. On the upside, if USD breaks above 7.3080 (minor resistance is at 7.2970), it would mean that the weakness has stabilised.
Next 1-3 weeks: Our latest narrative was from last Wednesday (01 Nov, spot at 7.3350), wherein “upward momentum has increased slightly, but USD has to break and stay above 7.3470 before a sustained rise is likely.” We indicated that “the chance of USD breaking clearly above 7.3470 will remain intact as long as it stays above 7.3100 in the next few days.” On Friday, USD broke below 7.3100 and plummeted to a low of 7.2861. Not only has upward momentum dissipated, but downward momentum has also begun to build. However, USD must break clearly below 7.2700 before further decline is unlikely. The risk of USD breaking clearly below 7.2700 will remain intact as long as it stays below 7.3250 in the next few days.
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