Further gains to 7.3000 in USD/CNH now seem to have lost some momentum, comment FX Strategists at UOB Group Quek Ser Leang and Peter Chia.

Key Quotes

24-hour view: “We expected ‘further rapid rise in USD’ and stated that ‘the levels to watch are at 7.2300 and 7.2500’. Our view was not wrong as the rally in USD took out both levels (high of 7.2668). However, the subsequent outsized sell-off from the high came as a surprise (low of 7.1450). While further volatility is not ruled out, USD is likely to trade within a narrower range of 7.1450/7.2250.”

Next 1-3 weeks: “We have expected USD to strengthen for more than 2 weeks now. As USD rose, in our latest update from yesterday (28 Sep, spot at 7.2050), we indicated that the breach of the key resistance at 7.1960 could carry USD higher to 7.2500, possibly 7.3000. USD subsequently surged to 7.2668 before plunging to a low of 7.1450. While our ‘strong support’ at 7.1400 (no change in level from yesterday) is not breached, after the sharp drop from the high, the odds of USD rising to 7.3000 have diminished. Looking ahead, a breach of 7.1400 would indicate that USD strength has come to an end.”