A breach of 6.4000 could motivate USD/CNH to slip back to the 6.3800 area in the next weeks, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday ‘the underlying tone has weakened but any decline is likely limited to a test of the major support near 6.4130’. We added, ‘the next major support at 6.4000 is not expected to come into the picture for now’. The subsequent weakness exceeded our expectation as USD came close to breaking 6.4000 (low of 6.4009). While the rapid drop appears to be running ahead of itself, there is no sign of stabilization just yet. From here, USD could dip below 6.4000 but the prospect for extension to 6.3900 is not high. Resistance is at 6.4140 followed by 6.4200.”

Next 1-3 weeks: “While we noted yesterday (15 Feb, spot at 6.4220) that ‘there is still chance for USD to break 6.4130 and move lower to 6.4000’, we did not quite anticipate the rapid manner by which it dropped to 6.4009. Downward momentum has improved and a break of 6.4000 would shift the focus towards the next support at 6.3800. Overall, the weak phase in USD that started last week appears to have room to run as long as the ‘strong resistance’ at 6.4400 is intact (level was at 6.4600 yesterday).”

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