Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group argue that USD/CNH could have embarked on a potential move to 7.3500.
24-hour view: We expected USD to trade sideways yesterday. However, USD took off and soared to a high of 7.3120. Unsurprisingly, upward momentum has increased significantly. USD is likely to rise further even though it is unlikely to reach 7.3500 today (there is another resistance at 7.3300). On the downside, 7.2900 is a solid support (minor support is at 7.3000).
Next 1-3 weeks: On Monday (04 Sep, spot at 7.2670), we indicated that “there is a slight increase in downside risk.” We also indicated that USD “must break and stay below 7.2390 before a sustained decline is likely.” However, USD did not break 7.2390. Instead, it broke above our ‘strong resistance’ level of 7.3000 and soared to 7.3120. The price action has shifted the risk to the upside, likely towards 7.3500. The upside risk is intact as long as USD stays above 7.2800.