Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group note that further downside looks likely once USD/CNH breaches the 7.2800 level.

Key Quotes

24-hour view: Our view from last Friday was that USD “could decline towards 7.2800, but it is unlikely to break below this major support level.” Our view was not wrong, as USD dropped to a low of 7.2812 before rebounding. The rebound has room to extend, but it is unlikely to break the strong resistance level at 7.3200. Support is at 7.2950, followed by 7.2850. 

Next 1-3 weeks: Last Friday (29 Sep, spot at 7.2975), we highlighted that “downward momentum is beginning to build.” We added, USD “has to break and stay below 7.2800 before a sustained decline is likely.” USD then dropped to a low of 7.2812 before rebounding. We continue to hold the same view for now. If USD breaks above 7.3200 (no change in ‘strong resistance’ level), it would mean that USD is likely to continue to trade in a range.