USD/CNH could extend the upside bias above 7.2500 – UOB

USD/CNH is likely to see its upward momentum surpass the 7.2500 level in the near term, note Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: We did not anticipate the strong rise in USD that sent it soaring to a high of 7.2460 (we were expecting it to trade in a range). While severely overbought, the USD advance is not showing any signs of reversing just yet. In other words, USD is likely to rise further even though the major resistance at 7.2800 is unlikely to come under threat (minor resistance is at 7.2650). In order to keep the momentum going, USD must stay above 7.2280 (minor support is at 7.2350). 

Next 1-3 weeks: Yesterday (26 Jun, spot at 7.2120), we indicated that “while momentum has not improved much, USD could rise further, albeit at a slower pace.” We added, “The next level to watch above 7.2300 is 7.2500.” We did not anticipate the rapid rise as USD rose to 7.2460. Despite the advance, we still do not detect a clear increase in momentum. That said, USD could break above 7.2500, but remains to be seen if 7.2800 will come into view. On the downside, a breach of 7.1980 (‘strong support’ level was at 7.1700 yesterday) would suggest USD is not rising further.