MUFG Research discusses the current market conditions and highlights the importance of the 7.00 level in USD/CNY and 96.50 for DXY.
"Market attention is currently focused on two key levels in the foreign exchange market. The 7.0000-level for USD/CNY and 96.500 for the dollar index. If either level if broken decisively it could result in a higher volatility in the foreign exchange market," MUFG notes.
"We would expect further Asia and emerging market FX weakness if USD/CNY breaks above the 7.0000-level, while further US dollar weakness especially against low yielding currencies including the euro, Swiss franc and yen would be likely if the dollar index breaks below the 96.500-level," MUFG adds.