The prospect for extra downside in USDCNH seems to have lost some traction as of late, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we held the view that USD ‘is likely to trade with an upward bias but is not expected to break 7.0850’. However, USD rose more than expected as it soared to a high of 7.1110. The advance appears to be running ahead but there is room for USD to test 7.1200 first before the risk of a pullback increases. We do not expect a sustained advance above 7.1200. On the downside, a break of 7.0800 (minor support is at 7.0950) would indicate that the current upward pressure has subsided.”

Next 1-3 weeks: “Two days ago (15 Nov, spot at 7.0465), we highlighted that there is room for USD to drop further to 7.0130 but oversold short-term conditions could lead to consolidation first. We added, “only a break of 7.1200 would indicate that USD is not weakening further”. Yesterday, USD rose to a high of 7.1110. Downward momentum has waned and the chance of further USD weakness has diminished. Looking ahead, a break of 7.1200 would indicate that USD has moved into a consolidation phase.”