Support is at 6.9700 – UOB Group

Further sharp declines seem likely; the support is at 6.9700. It is not unreasonable to expect further weakness in the US dollar (USD), especially when there are no significant levels of support nearby, note UOB Group FX strategists Quek Ser Leang and Peter Chia.

USD/CNH will continue to trade lower

24-HOUR OUTLOOK: “The sudden sell-off that sent the US dollar lower yesterday took us by surprise (we were expecting consolidation). Not surprisingly, further USD weakness looks likely today. As the next support is some distance away at 6.9700, we could continue to see strong declines today. On the other hand, any short-term rebound is likely to remain below 7.0380, with minor resistance at 7.0200.”

WEEKS 1-3: “We turned negative on the USD last Friday (Sept 20, spot at 7.0700) indicating ‘likely to trade on a downtrend towards 7.0500.’ After the USD fell sharply, in our most recent narrative two days ago (September 23, spot at 7.0450), we indicated that “the sharp decline has added further downside momentum, and the USD is likely to continue to weaken, potentially at 7.0100.” Yesterday, the USD fell to 7.0117. Today the USD dropped below 7.0000. Given the impulsive price movements, it is not unreasonable to expect further USD weakness, especially when there are no significant support levels nearby. Meanwhile, short-term levels to monitor are 6.9700 and 6.9400. Overall, we will still expect the USD to decline, provided 7.0600 (the previous ‘strong resistance’ level at 7.0770) is not breached.”