As long as US Dollar (USD) remains below 7.2800 vs Chinese Yuan (CNH), it could dip below 7.2500 before stabilisation is likely. In the longer run, increase in momentum suggests USD could decline to the major support at 7.2300, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
USD has a chance to decline to the major support at 7.2300
24-HOUR VIEW: "USD plummeted to a low of 7.2685 last Thursday. On Friday, when USD was at 7.2785, we pointed out, 'provided that 7.2950 is not breached, there is a chance for USD to dip below the 7.2685 low before stabilisation is likely.' We added, 'the next support at 7.2500 is unlikely to come into view.' USD subsequently rose to 7.2904 and then, in a surprising move, plunged and almost reached 7.2500 (low of 7.2512). Unsurprisingly, the price action has resulted in a sharp and rapid increase in downward momentum. Today, as long as USD remains below 7.2800 (minor resistance is at 7.2710), it could dip below 7.2500 before stabilisation is likely. This time around, the major support at 7.2300 is unlikely to come into view."
1-3 WEEKS VIEW: "Last Friday (14 Feb, spot at 7.2785), we highlighted that 'there has been an increase in momentum, but not enough to indicate the start of a sustained decline.' We also highlighted that, 'to continue to decline, USD must break and remain below 7.2500.' We added, 'the likelihood of USD breaking clearly below 7.2500 will increase in the next few days as long as 7.3070 is not breached.' USD subsequently dropped to a low of 7.2512. While the 7.2500 level has not been clearly breached yet, the increase in momentum suggests USD could decline to the next major support level, at 7.2300. On the upside, the ‘strong resistance’ level has moved lower to 7.2960 from 7.3070."
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