FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang note a probable test of 6.9000 appears to have lost some momentum in USD/CNH for the time being.

Key Quotes

24-hour view: “We highlighted yesterday that ‘conditions remain overbought but the improved upward momentum is likely to lead to a break of 6.8800’. We added, ‘the next major resistance at 6.9000 is not expected to come into the picture’. While our view was not wrong as USD took out 6.8800 and rose to a high of 6.8845, we did not expect the sharp drop from the high (low has been 6.8369). Upward pressure has eased and USD appears to have moved into a consolidation phase. For today, we expect USD to trade within a range of 6.8350/6.8750.”

Next 1-3 weeks: “After USD soared to 6.8751, we highlighted yesterday (23 Aug, spot at 6.8660) that upward momentum is still solid and a break of 6.8800 would not be surprising. We added, ‘the next level to focus on is at 6.9000’. USD subsequently took out 6.8800 but dropped sharply from a high of 6.8845. The sharp decline came close to taking out our ‘strong support’ level at 6.8330 (low of 6.8369). The rapid loss in shorter-term upward momentum has diminished the odds for USD to advance to 6.9000. However, only a break of 6.8330 would indicate that USD has moved into a consolidation phase.”