USD/CNH now focuses on 6.5050 – UOB

USD/CNH faces extra gains on a breakout of the 6.5050 level, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected USD to ‘trade sideways between 6.4730 and 6.4930’ yesterday. While our view for sideway-trading was not wrong, USD traded within a narrower range than expected (6.4745/6.4857). Upward momentum is beginning to improve and the risk is for a stronger USD. In view of the nascent build-up in momentum, any advance is expected to face solid resistance at 6.4930. The strong resistance at 6.5050 is unlikely to come under threat. Support is at 6.4790 followed by 6.4730.”

Next 1-3 weeks: “Our latest narrative was from last Friday (23 Apr, spot at 6.4900) where we indicated that ‘risk is still for a lower USD but any weakness is expected to encounter solid support at 6.4700’. USD dropped to 6.4713 yesterday (26 Apr) before rebounding. The rebound ahead of the solid support coupled with oversold conditions suggests that the prospect for further USD weakness is not high. That said, only a break of 6.5050 (‘strong resistance’ level previously at 6.5200) would indicate that the weakness in USD that started about 2 weeks ago has come to an end.”