The surpass of 7.200 would most likely reduce bets of a drop to 7.1000 in USD/CNH, argue Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB.
24-hour view: We held the view yesterday that USD “is under mild downward pressure and is likely to edge lower.” We were also of the view that “any decline is unlikely to threaten last week’s low of 7.1170”. Our view did not materialise as USD traded in a quiet manner between 7.1332 and 7.1572 before ending the day largely unchanged (7.1465, -0.03%). Momentum indicators are mostly flat, and today we expect USD to trade sideways between 7.1280 and 7.1700.
Next 1-3 weeks: Last Wednesday (26 Jul, spot at 7.1465), we highlighted that “downward momentum has increased, and there is room for USD to weaken further.” We added, “it is worth noting that there are a couple of strong support levels at 7.1240 and 7.1000.” After USD dropped to 7.1170 and rebounded, we highlighted last Friday (28 Jul, spot at 7.1700) that “If USD breaks above 7.2000 it would suggest that 7.1000 is not coming into view this time around.” We continue to hold the same view.