Extra losses are likely to drag USD/CNH to the 6.8350 level ahead of a potential test of the 6.8000 region in the near term, in the opinion of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “While our view for USD to weaken yesterday was not wrong, we did not anticipate the sharp selloff that sent USD plunging to a low of 6.8315 (we were of view that 6.8500 is unlikely to come under threat). Downward momentum is clearly strong and this could lead to further USD weakness. That said, deeply oversold conditions could “limit” any further losses to 6.8350. The downside risk is intact as long as USD stays below 6.8920 (minor resistance is at 6.8780).”

Next 1-3 weeks: “We highlighted yesterday (13 Mar, spot at 6.9180) that the outlook is mixed and for the time being and we expected USD to trade in a broad range of 6.8500/6.9500. We did not anticipate the outsized selloff as USD plunged by 1.20% (NY close of 6.8557), its largest 1-day drop in 3-1/2 months. The impulsive drop is likely to continue. Support levels are at 6.8350, followed by 6.8000. On the upside, a breach of 6.9300 (‘strong resistance’ level) would indicate that USD is not weakening further.”