USD/CNH keeps the broad consolidation so far – UOB

FX Strategists at UOB Group expect the pair to remain sidelined for the next weeks.

Key Quotes

24-hour view: “The sudden and sharp drop in USD yesterday came as a surprise. While the swift decline appears to be running ahead of itself, there is no sign of stabilization just and it is too soon to expect a recovery. From here, USD is likely to consolidate and trade sideways to slightly lower. Expected range for today, 7.0050/7.0350”.

Next 1-3 weeks: “Two weeks ago (13 Nov, spot at 7.0200), we highlighted that USD has moved into a ‘broader consolidation phase’ and ‘USD is expected to trade sideways between 6.9750 and 7.0600 for a period’. When USD moved higher towards 7.0500, we indicated last Thursday (21 Nov, spot at 7.0475) that ‘we are not convinced that the current USD strength can be sustained’. We added, ‘only a clear move above 7.0600 would suggest further USD strength is likely’. The relatively sharp decline of -0.28% yesterday (26 Nov) reinforces our view. In other words, we continue to view the current movement in USD as part of a sideway-trading range. That said, after the rapid decline yesterday, we have adjusted the expected trading range to 6.9700/7.0500 from 6.9750/7.0600”.