USD/CNH faces further upside pressure – UOB

FX Strategists at UOB Group expect USD/CNH to edge higher in the near term.

Key Quotes

24-hour view: “USD traded between 7.1355 and 7.1491 yesterday, narrower than our expected sideway-trading range of 7.1280/7.1500. The firm price action upon opening this morning has resulted in an up-tick in momentum. While the bias is tilted to the upside, any advance is expected to face strong resistance at last week’s 7.1645 top. That said, a clear break of the solid resistance could potentially lead to a rush higher. Support is at 7.1430 followed by 7.1350.”

Next 1-3 weeks: “While USD closed little changed yesterday (7.1491, +0.02%), upward momentum is showing sign of picking up. In other words, the ‘mildly positive’ outlook that we indicated last Friday (22 May, spot at 7.1290) has improved further and from here, the risk of a break of the key resistance at 7.1652 has increased. A breach of this level would signify a break-out and could potentially lead a sharp and rapid rise as the next resistance level of note is not until 7.2000. To look at it another way, the odds for a strong advance in USD has increased and only a break of 7.1100 (no change in ‘strong support’ level for now) would indicate that a break-out is unlikely.”