The United Overseas Bank (UOB) Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang have indicated that the US Dollar/Chinese Yuan (USD/CNH) exchange rate is likely to encounter a strong upward barrier at the 6.9300 level in the near future.
In their 24-hour view, they noted that the US Dollar had continued to advance, but that the overbought conditions suggested that a break of 6.8800 was unlikely. As it turned out, the US Dollar rose to 6.8800 and traded on a firm note in early Asian trade, edging above 6.8800. The analysts believe that further US Dollar gains are likely, but that the next major resistance at 6.9000 may be out of reach today. They have identified the support at 6.8650, and a breach of 6.8570 would indicate that the US Dollar is not advancing further.
Looking ahead to the next 1-3 weeks, the analysts reiterated their view that the outlook for the US Dollar is still positive and that a break of 6.8800 would shift the focus to 6.9000. As expected, the US Dollar edged above 6.8800 in early Asian trade. The analysts believe that the next major level above 6.9000 is at 6.9300, and that only a break of 6.8360 (the ‘strong support’ level was at 6.8250 yesterday) would indicate that the US Dollar strength that started earlier this month has come to an end.
The US Dollar has been on a strong upward trend since the start of the month, and the analysts believe that this trend is likely to continue in the near future. This is likely to be supported by the strong US economy, which has been bolstered by the recent tax cuts and increased government spending. In addition, the US Dollar is expected to benefit from the ongoing trade tensions between the US and China, as investors seek the relative safety of the US Dollar.
In addition, the analysts believe that the Chinese Yuan is likely to remain under pressure in the near future. This is due to the ongoing trade tensions between the US and China, as well as the recent weakening of the Chinese economy. As a result, the Chinese Yuan is likely to remain weak against the US Dollar, which will further support the upward trend of the USD/CNH exchange rate.
Overall, UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang believe that the USD/CNH exchange rate is likely to meet a solid up barrier at the 6.9300 level in the near term. This is likely to be supported by the strong US economy, the ongoing trade tensions between the US and China, and the weakening of the Chinese Yuan. As such, investors should keep a close eye on the USD/CNH exchange rate in the coming weeks, as it could have a significant impact on their portfolios.
