- Offshore Yuan closed below 6.70 per USD on Wednesday for the first time since September 2017.
- Golden crossover favors further weakness in CNH (further rally in USD/CNH), however, the 14-day relative strength index (RSI) is reporting overbought conditions.
The USD/CNH pair is holding above 6.70, having closed above that level yesterday for the first time since September 2017.
The People's Bank of China (PBOC) set the Yuan midpoint rate of 6.6723 today - the weakest daily fix since August 2017. Further, the 0.74 percent rise from the previous day's setting at 6.6234 is the biggest since January 2017.
The weaker fix will likely keep the onshore (CNY) and offshore (CNH) on the defensive. Also, the USD/CNH daily chart shows a golden crossover - a bullish crossover between the 50-day moving average (MA) and 100-day MA.
So, the path of least resistance is on the higher side. However, the RSI is flashing overbought conditions, which makes the USD/CNH pair vulnerable to a pullback.
It remains to be seen whether golden crossover overshadows overbought conditions and yields another leg higher in the USD/CNH pair. It is worth noting that, more often than not, the overbought conditions overpower the golden crossover - a lagging indicator - in the short-term.
USD/CNH Technical Levels
Resistance: 6.7292 (session high), 6.7329 (July 3 high), 6.859 (June 2017 high)
Support: 6.70 (psychological support), 6.6720 (5-day MA), 6.6637 (10-day MA)
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