USD/CNH: Extra gains need to clear 7.2000 – UOBby Pablo Piovano
According to FX Strategists at UOB Group, USD/CNH’s outlook remains positive and is expected to climb further on a breakout of the 7.20 level.
24-hour view: “Our expectation for ‘further USD strength’ did not materialize as USD traded between 7.1542 and 7.1868 before ending the day little changed at 7.1712 (-0.07%). USD has likely moved into a consolidation phase and for today, it is expected to trade between 7.1500 and 7.1900.”
Next 1-3 weeks: “We warned yesterday ‘the risk of USD breaking above 7.1652 has increased’ and highlighted that such a move ‘could potentially lead to a sharp and rapid rise’. While the subsequent rally did not break the major 7.2000 level (high of 7.1966), strong upward momentum suggests the risk for the coming days is still on the upside. Note that the record high was at 7.1960 in September last year and from here, a break of 7.2000 could potentially lead to further strong gains as once above this ‘round number’ resistance, the next resistance level of note is nearer to 7.2400. All in, the current positive outlook is deemed as intact as long as USD holds above 7.1400 (‘strong support’ level was at 7.1100 yesterday).”