USD/CNH: Downward bias is building - UOB Group

US Dollar (USD) is likely to trade with a downward bias, but any decline is unlikely to break below 7.1100. In the longer run, downward bias is building, but USD must first close below 7.1100 before a sustained decline can be expected, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Any decline is unlikely to break below 7.1100

24-HOUR VIEW: "USD fell to a low of 7.1218 last Friday and then recovered. Yesterday, we highlighted the following: 'Despite the decline, there has been no significant increase in downward momentum. That said, there is a chance for USD to test the major support at 7.1200 before a more sizeable recovery is likely. USD is unlikely to break clearly below 7.1200. On the upside, if USD breaks above 7.1375 (minor resistance is at 7.1340), it would mean that USD has likely entered a range-trading phase.' USD subsequently rose to 7.1328, dropped to 7.1214, and then closed at 7.1229 (-0.05%). Not only has there been no sign of a recovery, but downward momentum has also picked up slightly. Today, we expect USD to trade with a downward bias, but based on the current momentum, any decline is unlikely to break below 7.1100 (there is another support level at 7.1160). Resistance is at 7.1270; a breach of 7.1320 would indicate that the current mild downward pressure has eased."

1-3 WEEKS VIEW: "Following last Friday's price movements, we indicated the following yesterday (08 Sep, spot at 7.1285): 'There has been an increase in downward momentum, but not significantly. Overall, while the downward bias is building, USD must first close below 7.1100 before a sustained decline can be expected. The odds of USD closing below 7.1100 are not high for now, but they will remain intact as long as 7.1500 is not breached.' We continue to hold the same view, but the 'strong resistance' is now at 7.1400 instead of 7.1500."