UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang note a deeper decline in USD/CNH could see the 7.000 level revisited in the near term.
24-hour view: “We highlighted yesterday that USD ‘could test 7.0200 first before the risk of a rebound increases’. Our expectations did not materialize as USD traded within a range of 7.0256/7.0919 before closing slightly lower at 7.0390 (-0.11%). The price movement is likely part of a consolidation phase and we expect USD to trade within a range of 7.0300/7.0800 today.”
Next 1-3 weeks: “We continue to hold the same view as yesterday (01 Dec, spot at 7.0400). As highlighted, the recent outsized drop in USD is likely to extend to 7.0200, possibly below 7.0000. The downside risk is intact as long USD does not move above 7.1250 (‘strong resistance’ level was at 7.1400 yesterday).”