Slight risk of rebound – OCBC

USD/CNH traded at a low of 7.0710 last Friday after breaking below the psychological 7.10 level, notes OCBC FX analyst Christopher Wong.

It’s appreciation time for USD/CNH

“Exporter market talk caught the USD long, rushing to offload after the pair breached key levels and month-end distortions. Daily momentum is steady, while the RSI is showing bullish signs near oversold conditions. The risk of a rebound is not ruled out, but technical levels may be breached if the USD bear trend continues.”

“Ongoing market talk of USD conversion flows from exporters, funds may see larger slippages if there is a lot of panic, and usually a break of a key downtrend level can accelerate this move. The potential reversal of Trump bets/hedges may also be another contributing factor to the USD/CNH sell-off. Key support to 7.07/7.08. If broken, next support is 7.03, 7 levels (major support). Resistance to 7.14.”

“We will also pay close attention to the USD/CNY daily fix to gauge how comfortable policymakers are with the pace of RMB appreciation. Today’s fix was set at 7.1027, even as USD/CNH traded around 7.09. This may imply that policy makers are trying to slow the rate of appreciation this time around.”