If USD/CNH breaches 7.1100 it could leave the 7.1552 level as a near-term peak, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: We highlighted yesterday that USD “is likely to strengthen further but the major resistance at 7.1800 is likely out of reach today”. However, after eking out a fresh 7-month high of 7.1552, USD plummeted to a low of 7.1170. The sharp and swift decline appears to be overdone and USD is unlikely to weaken much further. Today, USD is more likely to trade in a range of 7.1100/7.1400.

Next 1-3 weeks: Yesterday (08 Jun, spot at 7.1500), we held the view that the risk for USD is still on the upside. We added, “the upside risk is intact as long as USD stays above 7.1100”. We did not anticipate the sharp selloff, as after rising to 7.1552, USD plummeted to a low of 7.1170. From here, if USD breaks below 7.1100, it will suggest that USD could have made an interim top at 7.1552.