USD/CNH: Further decline still favored — UOB

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UOB Group Market Strategist, Quek Ser Leang, suggests more losses lie ahead for USD/CNH short term.

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“…when USD/CNH was trading at 6.8900, we noted that ‘the rapid pace of decline suggests that the USD/CNH could break both 6.8400 and the 55-week exponential moving average (currently at 6.8240)’.”

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“Although our view was correct, we did not expect the sharp decline that occurred when USD/CNH fell below 6.8400 and 6.8240 and plummeted to a low of 6.7045 last week before extending its decline to 6.6982 yesterday (Jan 16). It should be noted that, in two weeks, USD/CNH lost 1.71% last Friday, the biggest drop in two weeks on record.”

“Further USD/CNH weakness is not ruled out, but after such a steep decline in such a short time, the risk is that USD/CNH will consolidate first before heading lower later. Even if USD/CNH Weakening further, the pace of any decline is likely to slow, especially when there are several strong support levels between 6.5730 and 6.6670 Resistance: Breaking above 6.8550 would indicate that the sharp decline in USD/CNH of the past few weeks has stabilized .”

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Source: Fx Street

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