Further selling pressure could drag on USD/CNH to the 7.1100 region in the near term, according to economist Lee Sue Ann and market strategist Quek Ser Leang of UOB Group.
24-hour outlook: We expected the USD to weaken yesterday, but we were of the view that 7.2000 was unlikely to be threatened. We did not expect the excessive and violent sell-off that sent the USD to a low of 7.1631. The USD continues to fall in early Asian trade, with further USD weakness at risk. Given the heavily oversold conditions, it remains to be seen whether another major resistance at 7.1100 is within reach today (there is minor support at 7.1300). Resistance is at 7.1750; a breach of 7.1950 would mean USD weakness is likely to have stabilised.
Next 1-3 weeks: Yesterday (Nov 20, spot at 7.2220) we indicated that the USD “must break well below 70000 before a sustained decline to 7.1800 is likely”. We added that “only a breach of 7.2600 would mean downside risk has reduced.” We were surprised by the way the USD not only broke through 7.2000 but also dipped to 7.1631. Unsurprisingly, further USD weakness is likely. Next support is near 7.1100, just above the 55-week exponential moving average (see weekly chart in 1-3 month update below). On the upside, the “Strong Resistance” level moved significantly lower to 7.2200 from 7.2600