On March 22nd, after breaking its medium-term downside resistance line drawn from the high of December 21st, USD/CNH was not in a huge rush to fly high. The pair still had to break above its key resistance, near 6.7370, in order to confirm a higher high, which could allow more bulls to join in. Now that this has been accomplished, the pair is opening a horizon of higher levels, which were previously tested around mid-February. Therefore, we will stay somewhat bullish, at least in the short run.
A push above the 6.7500 barrier could invite even more buyers and lift the rate to its next potential resistance area, at 6.7625, marked near the lows of February 11th, 14th and 18th. The pair might get held there for a while, but if the bulls view that zone only as a temporary obstacle on their way north, a break of it could open the door to some higher areas. This is when we will examine the possibility of seeing a re-test of the 6.7850 hurdle, which is the high of February 19th.
Our momentum studies support that there could be some room for a bit more upside. The RSI, even though already close to 80, still points to the upside. The MACD is above zero and its trigger line, and also points to the upside.
Alternatively, if USD/CNH suddenly drops back below the 6.7300 hurdle, marked by today’s low, the rate might depreciate a bit more because such a move could spook the bulls from the field for a while. This is when we may see the pair traveling a bit lower to test the 6.7160 obstacle, which is the low of Wednesday. If that area fails to withhold the bear-pressure, a break below might open the door to the 6.7000 level, which acted as strong support on March 5th, 13th and 22nd.
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