UOB Group’s FX Strategists noted USD/CNH could have now embarked on a consolidative phase likely between 6.3300 and 6.3900 in the near term.

Key Quotes

24-hour view: “The sharp drop in USD came as a surprise (we were expecting USD to trade sideways). There is room for the decline to extend but any weakness is likely limited to a test of 6.3450. The major support at 6.3300 is unlikely to come into the picture. Resistance is at 6.3750 followed by 6.3850.”

Next 1-3 weeks: “We have expected a stronger USD since Monday (14 Mar, spot at 6.3620). As USD surged to our target at 6.4100, we highlighted yesterday (16 Mar, spot at 6.3895) that while risk is still on the upside, the next major resistance at 6.4300 may not come into the picture so soon. We did anticipate the abrupt and sharp sell-off that sent USD plunging to a low of 6.3530. The breach of our ‘strong support’ level at 6.3600 indicates that upward pressure has eased. The current movement is likely part a consolidation and in view of the recent outsized moves, USD could trade sideways within a broad range of 6.3300/6.3900 for now.”