USD/CNH Analysis: Offshore Yuan is most oversold since December 2016
- Offshore Yuan (CNH) sell-off is overdone, the USD/CNH 14-week RSI indicates.
- The pair could revisit 100-week moving average (MA) support before resuming the rally to December 2016 high of $6.986.
Currently, the USD/CNH pair is trading at 6.795, having clocked a 12-month high of $6.8360 earlier today and is looking extremely overbought.
Weekly chart
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The 14-week relative strength index (RSI) is at its highest level since December 2016, meaning the currency pair is most overbought (offshore Yuan is most oversold).
Daily chart
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Both RSI and stochastic have not confirmed the higher high in USD/CNH exchange rate (bearish divergence), indicating the rally is running out of steam.
4-hour chart
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The bearish price RSI divergence has been confirmed. Further, stochastic has generated a sell signal and is rolling over from the overbought territory.
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Clearly, a pullback is overdue. That said, a technical correction could run into fresh bids around the 100-week moving average (MA) support of 6.6350 as the moving averages are biased towards the bulls. The 5-week, 10-week and 5-day, 10-day MAs are trending north.
More importantly, the descending broadening channel breakout seen in the weekly chart indicates the rally from the 2014 low of $6.01 has resumed. So, the long-run outlook remains bullish as long as the pair is holding above the channel. Multiple weekly closes back inside the channel would invalidate the long-term bullish view.
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
