USD/CNH Price Analysis: Impending golden cross could yield flag breakout
|- USD/CNH's daily chart shows a bull flag or a bullish continuation pattern.
- The impending golden cross suggests scope for a bullish breakout;
USD/CNH remains trapped in a bull flag - a bullish continuation pattern, which would accelerate the upward move from the March 9 low of 6.9042 and open the doors for a test of resistance at 7.1956 (September high).
A daily close above the top end of the bull flag at 7.1197 would confirm a flag breakout. That looks likely as the 50-day average is trending north, indicating a strengthening of upward momentum and looks set to cross above the 200-day average in a day or two.
The resulting golden crossover, a widely-tracked bull market indicator, would be the first since June 2014. Some observers would argue that the golden cross is a lagging indicator. While that is true, the 14-day relative strength index is showing no signs of overbought conditions. The crossover, therefore, could invite stronger buying pressure.
At press time, the pair is trading largely unchanged on the day near 7.0910. The probability of the pair confirming a flag breakout on Wednesday would rise if China's Caixin Manufacturing PMI, which surveys small and medium-sized export-oriented units, prints below estimates.
Daily chart
Trend: Bullish
Technical levels
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