USD/CNH could slip back to the 7.1000 region once 7.1250 is cleared, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: We highlighted yesterday that “there is a chance for USD to test 7.1500 before the risk of a rebound increases.” We added, “7.1250 is unlikely to come into view today.” Our view turned out to be correct as USD dropped to a low of 7.1479 and then closed at 7.1505 (0.22%). Downward momentum has increased and USD is unlikely to rebound just yet. Today, USD could drop below 7.1250. The round number support at 7.1000 is unlikely come under threat. In order to maintain the momentum, USD must stay below 7.1700 (minor resistance is at 7.1600). 

Next 1-3 weeks: Yesterday (13 Jul, spot at 7.1670), we pointed out that “the focus is at 7.1500, and the next support below this level is at 7.1250.” USD fell to a low of 7.1479 before extending its decline in early Asian trade. We continue to expect USD to weaken. A break of 7.1250 will shift the focus to 7.1000. On the upside, a break of 7.1930 (‘strong resistance’ level was at  7.2150 yesterday) would suggest the USD weakness that started on Monday has stabilized.