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by Charalambos Pissouros

USD/CNH Tumbles Back Below 7.0000

USD/CNH tumbled yesterday, falling back below the psychological barrier of 7.0000. That said, the pair hit support at 6.9225 and then, it rebounded. Overall, the pair continues to trade within a downside channel that’s been containing the price action since September 2nd, and thus, we would consider the near-term outlook to still be negative.

The rate could continue recovering for a while more, perhaps breaking back above the 7.0000 mark. The bears may decide to take charge again from near the 7.0400 zone, or the upper end of the channel, and drive the rate back down to 6.9225. If that level is not able to withstand the slide this time around, a break lower may pave the way towards the 6.9000 zone, or even the lower bound of the channel.

Shifting attention to our daily oscillators, we see that the RSI hit its 30 line and turned up, while the MACD lies below both its zero and trigger lines. Both indicators detect negative momentum, but the rebound of the RSI adds to our view that some further recovery may be on the cards before the next leg south.

In order to abandon the bearish case, we would like to see a clear break above 7.0843. The rate would already be above the upper end of the channel and may initially aim for the high of October 16th, at around 7.1120. Another break, above 7.1120, may carry more bullish implications, perhaps opening the path towards the 7.1675 hurdle, defined by the peak of October 9th.

USD/CNH daily chart technical analysis


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