Further upside in USD/CNH is likely and is expected to meet a tough barrier around 7.1500 in the short-term horizon, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “Our view for USD to trade sideways in a range of 7.0700/7.0930 was incorrect. Instead of trading sideways, USD surged to 7.1093 before pulling back sharply to end the day modestly higher at 7.0899 (+0.10%). Despite the advance, there is only a slight increase in momentum. Today, USD could strengthen further but it is unlikely to break clearly above 7.1200. Support is at 7.0850, followed by 7.0750.”

Next 1-3 weeks: “We turned positive USD in the middle of the month when it was trading at a much lower level of 6.9580. As USD soared, in our most recent narrative from Monday (29 May, spot at 7.0800), we highlighted that last Friday’s outside reversal day suggests the chance of USD rising further to 7.1200 is low. We added, ‘only a breach of 7.0500 would indicate that the USD strength has run its course’. Yesterday, USD surged to a fresh high of 7.1093. Upward momentum has increased, albeit not much, and the chance of USD breaking 7.1200 has increased as well. At this stage, it is premature to expect the next major resistance at 7.1500 to come into view. On the downside, the ‘strong support’ level has moved higher to 7.0600 from 7.0500.”