The continuation of the upside momentum in USD/CNH could challenge the 7.1200 level in the next weeks, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted yesterday that USD could break above 7.0960 but it might not be able to hold above this level. USD rose to a high of 7.0945 in NY trade before rising briefly above 7.0960 in early Asian trade. Conditions are deeply overbought and USD is unlikely to advance much further. Today, we expect USD to trade in a range, likely between 7.0700 and 7.1000.”

Next 1-3 weeks: “We turned positive USD two weeks ago. As USD rose, in our latest narrative two days ago (24 May, spot at 7.0780), we highlighted that USD ‘is likely to break above 7.0960’. We added, ‘a breach of this level will shift the focus to 7.1200’. While USD rose above 7.0960 in early Asian trade today, conditions are deeply overbought and 7.1200 may not come into view so soon. Overall, only a break of the ‘strong support’ level at 7.0500 (level previously at 7.0280) would indicate the USD is not advancing further.”