FX analysts Quek Ser Leang and Peter Chia at UOB Group note that while the US Dollar (USD) is showing signs of softening against the Chinese Yuan (CNH), a sustained drop below the key 7.1200 support level remains unlikely in the short term.
Short-Term Outlook: USD May Test 7.1200, But Likely to Hold
In Wednesday’s session, USD/CNH initially rose to 7.1429, then reversed to a low of 7.1250, closing the day slightly lower at 7.1297 (-0.15%). UOB analysts now see slightly stronger downward momentum, suggesting the pair may retest the 7.1200 level.
While a brief dip below 7.1200 can’t be ruled out, the analysts believe a clear and sustained move below this level is unlikely. On the upside, immediate resistance is seen at 7.1330, followed by 7.1400.
Medium-Term View: Pressure Building, But Key Support Must Break
In their previous outlook (issued Oct 10, with USD/CNH at 7.1370), UOB projected a range-bound move between 7.1200 and 7.1550. The pair has since edged lower toward the bottom of that range, reaching 7.1250.
The analysts now observe that downward momentum is gradually strengthening, but caution that for further declines to materialize, USD/CNH must break and hold below 7.1200.
As long as the pair remains below the strong resistance at 7.1460, the bias remains tilted to the downside. If 7.1200 gives way, the next key support is seen at 7.1130.
