USD/CNH could see its upside momentum alleviate in case it breaks below the 7.1980 level in the short-term horizon, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: We expected USD to rise further yesterday. However, after eking out a fresh 7-month high of 7.2490, it plunged to 7.2064 and then rebounded to end the day at 7.2258 (-0.28%). The current price movements are likely part of a consolidation phase. Today, we expect USD to trade between 7.2050 and 7.2400. 

Next 1-3 weeks: We turned positive in USD one week ago (see annotations in the chart below). While USD rose as expected, we indicated yesterday (27 Jun, spot at 6.7450) that “USD could break above 7.2500, but it remains to be seen if 7.2800 will come into view.” USD then rose to 7.2490 and then fell sharply. Upward momentum is beginning to wane, but only a break of 7.1980 (no change in ‘strong support’ level) suggests USD is not ready to move above 7.2500.