Extra weakness could see USD/CNH revisit the area below the 7.1800 level in the short-term horizon, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: We expected USD to decline yesterday but we were of the view that “the major support at 7.1800 is likely out of reach.” USD weakened less than expected as after dropping to 7.2205, it rebounded and ended the day little changed at 7.2298 (-0.03%). The underlying tone still appears to be soft, and today, USD is likely to trade with a downward bias. However, 7.1800 is still likely out of reach. Resistance is at 7.2380, followed by 7.2500. 

Next 1-3 weeks: Yesterday (10 Jul, spot at 7.2230), we indicated that short-term momentum is building rapidly, and the risk of USD pulling back below 7.1800 has increased. USD then traded in a range of 7.2205/7.2492 before closing little changed at 7.2298 (-0.03%). While there is no further increase in momentum, we will hold on to our view for now. Only a breach of 7.2650 (no change in ‘strong resistance’ level) would indicate that USD is not ready to head lower to 7.1800.