Further upside in USD/CNH is expected to face a strong hurdle at 7.0960 in the near term, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “While our view for USD to strengthen yesterday was correct, we were of the view that ‘the major resistance at 7.0500 is still unlikely to come into view for now’. The anticipated USD strength exceeded our expectations as it soared to 7.0607 before pulling back to close at 7.0515 (+0.58%). Today, USD could continue to rise but the next major resistance at 7.0960 is likely out of reach. Support is at 7.0400, followed by 7.0250.”

Next 1-3 weeks: “Yesterday (18 May, spot at 7.0150), we reaffirmed our positive USD view and indicated that ‘the next level to watch is at 7.055’. That said, we did not quite expect USD to surpass 7.0500 so quickly (USD soared to 7.0607 in NY trade). While we continue to expect USD to strengthen, it remains to be seen if it can break above the next major resistance at 7.0960. All in all, only a break of 7.0000 (‘strong support’ level previously at 6.9750) would indicate the USD strength that started last Friday has eased."