USD/CNH: Gains could accelerate on a break above 7.1960 – UOB

FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang note extra gains in USD/CNH need to clear the 2020 top at 7.1960 in the near term.

Key Quotes

24-hour view: “Yesterday, we highlighted that ‘the risk is for USD strength but the 2020 high of 7.1960 is unlikely to come into view for today’. We added, ‘there is another resistance at 7.1800’. Our view was not wrong as USD rose to a high of 7.1772. Conditions are deeply overbought but USD could test 7.1800 first before the risk of a pullback would increase. The 7.1960 level is still unlikely to come into view for now. Support is at 7.1520 followed by 7.1420.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (26 Sep, spot at 7.1510). As highlighted, all eyes are on the 2020 high of 7.1960 now. A breach of this major and long-term resistance could lead to an upward acceleration. Overall, only a break of 7.0950 (‘strong support’ level was at 7.0750 yesterday) would indicate that the USD strength that started more than a week ago has come to an end.”