Only two words that describe the recent sharp up-rise of the USD/CNH are “trade war”. The rate accelerated rapidly during the last three weeks, gaining around 5%, if we measure the distance from the low of 14th of June to yesterday’s peak. But during the Asian day yesterday, the bears jumped in and drove USD/CNH down sharply. Today, the slide continued, with the rate breaking below the steep upwards moving trendline taken from the 14th of June low.
As for the short-term scenario, we will stick to the downside, as the aforementioned upside trendline has been broken and we could see a bit of more retracement back down. The first good potential area of support to watch could be around the 6.6150 level, a break of which could open the path towards the 6.5935 area. If the bears remain in the driver’s seat, then a further drop to the 6.5575 could be possible.
The RSI is now slightly below its 50 zone and has the potential to move lower. The MACD is way below its trigger line and continues to head south. Both indicators are currently supporting the scenario discussed above.
On the other hand, a move back above the previously mentioned steep upwards moving trendline, could take the downside off the table for now and the rate could start aiming for the recent highs. The first obstacle for the pair to overcome could be the 6.6725 level. Above that lies the peak of the 3rd of July, near 6.7330, which is the highest point since July last year.
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