USD/CNH: Further gains likely above 7.0000 – UOB

A breakout of the 7.0000 mark could prompt USD/CNH to challenge the 7.0500 area in the near term, note FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we held the view that ‘a break of 7.0000 is not ruled out’ but we noted that ‘in view of the overbought conditions, USD may not be able to maintain a foothold above this level’. While USD subsequently soared, it did not break the 7.0000 level as it retreated sharply from 6.9967. The retreat amidst still overbought conditions suggests USD is unlikely to strengthen further. For today, USD is more likely to consolidate between 6.9450 and 6.9850.”

Next 1-3 weeks: “We highlighted yesterday (07 Sep, spot at 6.9770) that all eyes are on 7.0000 now. USD subsequently rose to 6.9967 before pulling back. Overbought shorter-term conditions could lead to a few days of consolidation first. As long as 6.9300 (no change in ‘strong support’ level from yesterday) is not breached, there is still chance for USD to break 7.0000. A break of this level would shift the focus to 7.0500.”