Further upside in USD/CNH should remain in the pipeline while above the 7.2000 level, comment UOB Group’s Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew.

Key Quotes

24-hour view: While we expected USD to advance yesterday, we held the view that it “is unlikely to break clearly above 7.1800.” However, USD broke above 7.1800 and rose to 7.1889. Upward momentum is building and today, USD could break above 7.2000 but it remains to be seen if it can maintain a foothold above this major resistance level. The next resistance at 7.2300 is unlikely to come into view. The upside risk is intact as long as USD stays above 7.1700 (minor support is at 7.1800). 

Next 1-3 weeks: Last Friday (16 Jun, spot at 7.1380), we held the view that the recent USD strength had ended and we expected it to trade between 7.0900 and 7.1800 for the time being. We did not expect USD to rise above 7.1800 so quickly (NY high of 7.1889). While upward momentum is building again, USD must break and stay above 7.2000 before further sustained advance is likely. Looking ahead, the next resistance above 7.2000 is at 7.2300. The likelihood of USD breaking clearly above 7.2000 will remain intact as long as it stays above the ‘strong support’ level, currently at 7.1500.