USD/CNH Forecast: Deeper pullback ahead?

Omkar Godbole FXStreet Contributor

The USD/CNH pair created a big bearish inverted hammer candle last week, signaling a temporary bearish trend reversal is likely in progress.

At press time, the pair is trading at 6.8425 - down 1.66 percent from the last week's high of 6.9584.

Weekly chart

The inverted hammer candle indicates the rally from the March low of 6.2353 has run out of steam and a bearish reversal would be confirmed if the current weekly candle closes below the last week's low of 6.8268.

The probability is high that USD/CNY will find acceptance 6.8268, as the 14-week relative strength index (RSI) is flashing overbought conditions.

Further, the daily chart below shows a large bearish relative strength index divergence. More importantly, the 5-day and 10-day MAs have topped out, validating the argument put forward by the bearish inverted hammer candle that a short-term bull-to-bear trend change is being charted.

Daily chart

View

USD/CNY risks falling below to (23.6 percent Fib retracement of 6.2353/6.9584) his week and could be in for a deeper drop to 6.68 (38.2 percent Fib retracement) if it closes below 6.8268 (previous week's low) on Friday.
The overall outlook remains bullish as long as the pair is holding above the trendline sloping downwards from December 2016 high and May 2017 high. At press time, the trendline support is seen at 6.6611 (also 100-week moving average).

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

AUD/USD sits near a one-month top, above 0.7000 amid fresh USD selling

AUD/USD holds above 0.7000 through the Asian session, trading near a one-month high touched earlier this Monday amid renewed US Dollar selling. US bond yields decline further amid a modest pullback in crude oil prices, capping the USD recovery from a three-week low. Moreover, bets for a November RBA rate hike support the Aussie, though upside seems capped ahead of the crucial two-day FOMC meeting, starting Tuesday.

USD/JPY struggles below 157.00 on weak USD; holds above one-month low ahead of Fed, BoJ meetings

USD/JPY attracts fresh sellers during the Asian session on Monday, stalling its recovery from the lowest level since September 18, touched Friday as a further decline in US bond yields weighs on the US Dollar. Meanwhile, the Japanese Yen benefits from a more hawkish BoJ, further weighing on the currency pair. The downside, however, seems limited as traders keenly await Fed and BoJ policy meetings later this week.

Gold looks slightly bid above $4,000

Gold manage to regain some balance, leaving behind two daily drops in a row and reclaiming the key $4,000 mark per troy ounce and above on Monday. The better tone in the US Dollar and mixed US Treasury yields accompany the precious metal’s uptick, while declining crude oil prices appear to sustain the bounce for now.

Bitcoin stalls around $80,000 as geopolitical tensions dampen risk appetite

Bitcoin hovers around $80,500 on Monday after three straight weeks of correction. Rising geopolitical tensions in the Middle East continue to push oil prices higher, stoking inflation concerns and dampening risk appetite.

Everyone's bracing for a hawkish central bank week. Here's why the surprise could be dovish

Five of the world's major central banks are preparing to announce monetary policy decisions this week, with investors increasingly anticipating higher interest rates as the global energy shock continues to push inflation above target.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.