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by Darius Anucauskas

Is It Time For The US Dollar To Push A Bit Lower Against The Chinese Yuan?

Since the beginning of the US-China trade wars, the Chinese yuan had depreciated against its US counterpart, with the offshore yuan lost around 10% of its value against the US dollar. But what we can see is that the pair remains below the psychological 7.0000 barrier. The closest it got to that number this year was on the 31st of October, where the rate managed to reach the 6.9792 level, from which USD/CNH reversed back south. The pair is now making lower highs and lower lows, but will this tendency continue until the end of this year? From the technical side, as long as USD/CNH trades below the short-term downside resistance line, drawn from the peak of the 31st of October, we will aim for slightly lower levels.

Since mid-last week, USD/CNH has been climbing, but the upside could be limited due to the aforementioned downside line. If the bulls struggle to push the pair above that line, this could be a good signal for the bears to step in again to take advantage of the higher rate and then drive USD/CNH back down towards the lows of last week. This is when we will start looking at the 6.8520 area, which acted as a strong support on the 5th of December and on the 2nd of November. If the bears remain in control, the rate may continue depreciating towards the 6.8240 zone, a break of which may clear the path to the next potential area of support at 6.7810 obstacle, marked by the low of the 27th of August.

Alternatively, a break above the previously-mentioned short-term downside resistance line could invite more bulls to the table and push USD/CNH further up towards the 6.9580 barrier, a break of which could clear the path to the October high at 6.9792. If that hurdle is not able to withhold the offshore yuan from losing in value, its break might increase the chances of USD/CNH touching the psychological 7.0000 level.

USDCNH daily


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