USD, CNH, US Dollar, Chinese Yuan, USD/CNH – Technical Outlook:
- USD/CNH has rebounded from final week and is now operating into stiff resistance
- Is there extra upside in USD/CNH or is it headed for an additional leg decrease?
- What is the outlook and what are the signposts to look at?
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USD/CNH SHORT-TERM TECHNICAL FORECAST – SLIGHTLY BEARISH
The Chinese Yuan’s slide towards the US Dollar since final week is exhibiting indicators of fatigue because it assessments a strong cushion.
USD/CNH, up over 2% over the previous week, is now operating into stiff converged resistance: Thursday’s excessive of seven.18, the 200-period transferring common, and the 89-period transferring common on the 240-minute charts (the minor rebound earlier this month ran out of steam on the shorter transferring common). With detrimental momentum divergence (rising worth related to declining momentum), USD/CNH might discover it powerful to crack the resistance for now. This follows a rebound from close to assist on the October low of seven.01 –a path highlighted within the earlier replace. Also, USD/CNH met the value goal of a minor topping sample triggered earlier this month.
USD/CNH 240-minutes Chart
The larger query: does the rebound since final week open the best way for USD/CNH to retest the October excessive of seven.37, or is the pair going to fall additional earlier than it retests the document excessive? Two situations might emerge.
The first one is a fallback towards final week’s low of seven.02. A signpost to look at for this state of affairs to play out could be a drop beneath fast assist at Friday’s low of seven.11. The assist at 7.01-7.02 is essential – a break beneath would set off a head & shoulders sample — the left shoulder is on the September excessive, the top is on the October excessive, the precise shoulder would possible be this week’s excessive (nonetheless unfolding), pointing to a possible fall towards the 200-day transferring common (now at about 6.75).
USD/CNH Daily Chart
The second state of affairs is the place USD/CNH breaks above the fast converged resistance at 7.17-7.20. Such a break would affirm that the downward strain had eased, paving the best way towards the October excessive.
USD/CNH Monthly Chart
Which state of affairs are the chances leaning to? the detrimental divergence (rising worth related to stalling or weakening momentum) on the month-to-month and weekly chartshighlighted in Octobersuggests that the downward correction since October might not be over. That is, the likelihood of one other leg decrease – no less than towards final week’s low – stays excessive. Hence, state of affairs 1 appears to be like like a extra possible one. Having mentioned that, a decisive break above 7.20 would negate this state of affairs.
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— Written by Manish Jaradi, Strategist for DailyFX.com