USD/CNH: Further gains likely beyond 7.2000 – UOB

The upside momentum in USD/CNH is seen picking up a more convincing pace once 7.2000 is cleared, Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew at UOB Group.

Key Quotes

24-hour view: We highlighted yesterday that USD “could break above 7.2000 but it remains to be seen if it can maintain a foothold above this major resistance level.” USD rose to 7.2033 in Asian trade and the pulled back to end the day little changed at 7.1779 (-0.05). USD appears to have moved into a consolidation phase and is likely to trade between 7.1680 and 7.2020 today. 

Next 1-3 weeks: Our update from yesterday (21 Jun, spot at 7.1880) still stands. As indicated, while upward momentum is building again, USD must break and stay above 7.2000 before further sustained advance is likely. Note that USD rose to 7.2033 and then fell quickly. The likelihood of USD breaking clearly above 7.2000 will remain intact as long as it stays above the ‘strong support’ level at 7.1500 (no change in level). Looking ahead, the next resistance above 7.2000 is at 7.2300.