USD/CNH Forecast: Deeper drop to 6.80 likely as bearish signs buildup
The US-China trade truce has likely opened the doors to a deeper pullback in the USD/CNH (offshore yuan exchange rate) pair, technical charts indicate.
As of writing, the pair is trading at 6.90, down 0.60 percent on the day and 1.4 percent from the recent high of 6.98, respectively. Notably, the pair has suffered a symmetrical triangle breakdown with today's gap down opening, as seen in the charts below.
Daily chart
As seen above, the symmetrical triangle breakdown is backed by a bearish crossover on the MACD (moving average convergence divergence) and RSI's drop into bearish territory below 50.00.
Further, the 5- and 10-day simple moving averages (SMAs) have rolled over in favor of the bears. The pair has also found acceptance below the key support of 50-day SMA for the first time since April 25.
That bearish setup only adds credence to the negative view put forward by the weekly chart since mid-to-late October.
Weekly chart
Over on the weekly chart, the RSI diverged in favor of the bears and rolled over from the overbought territory five weeks ago, signaling the rally from the March low of 6.2353 has ended.
The bearish divergence of the RSI was also backed by MACD histogram's move below zero.
View
The spot looks set to take out the 100-day SMA support lined up at 6.88. That would only bolster the already bearish technical setup and open the doors to 6.80 - 23.6 percent Fibonacci retracement of 6.2353/6.98. The drop to 6.8 could happen over the next couple of weeks.
The bearish view would be invalidated if the immediate resistance at 6.9584 is scaled.
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
