FX Strategists at UOB Group believe that the downside pressure in USD/CNH should mitigate on a break above 6.3710 in the short-term horizon.

Key Quotes

24-hour view: “Yesterday, we were of the view that USD could drift lower but the major support at 6.3390 is unlikely to come under threat”. Our view was not wrong as USD dipped to 6.3419 before rebounding. The underlying tone has firmed somewhat and USD could edge higher from here. That said, any advance is unlikely to break 6.3610. Support is at 6.3460 followed by 6.3420.”

Next 1-3 weeks: “Our latest narrative from Monday (17 Jan, spot at 6.3610) still stands. As highlighted, the odds for further USD weakness are not high. However, only a breach of 6.3710 (no change in ‘strong resistance’ level) would indicate that the downside risk has dissipated. Looking ahead, any decline in USD is expected to encounter solid support at 6.3390 and 6.3300.”