USD/CNH Price Analysis: Hits 7-month low, indicators show oversold conditions

USD/CNH slips to seven-month low amid oversold readings on key indicators.
Daily candlesticks suggests the bearish sentiment is quite strong.

Omkar Godbole FXStreet Contributor

USD/CNH fell to 6.8760 early Thursday – the lowest level since Jan. 21. At press time, the pair is trading near 6.8790 – down 4.4% from the high of 7.1964 observed on May 27.

The daily chart slow stochastic indicator is now reporting oversold conditions with a below-20 ;print. The 14-day relative strength index, too, has dipped into oversold territory below 30.

Even so, it is too early to call bearish exhaustion. That’s because there are no signs of seller exhaustion on the daily chart. In fact, the daily chart shows the opposite. The pair created a bearish marubozu candle on Wednesday – a sign the bears are in control.

As such, the path of least resistance remains to the downside.

The trend, however, will likely turn bullish if Federal Reserve’s Chairman Jerome Powell does not signal tolerance for above-target inflation during this speech at the Jackson Hole Symposium on Thursday.

The central bank has mostly missed its 2% inflation target over the past eight years. Further, the US economy suffered a record contraction in the second quarter, courtesy of the coronavirus outbreak.

Hence, markets are convinced that the central bank would adopt a more relaxed approach to inflation and allow price pressures to rise above the target.

Daily chart

Trend: Bearish

Technical levels

USD/CNH

Overview
Today last price	6.8804
Today Daily Change	-0.0004
Today Daily Change %	-0.01
Today daily open	6.8808

Trends
Daily SMA20	6.9409
Daily SMA50	6.9948
Daily SMA100	7.0479
Daily SMA200	7.0249

Levels
Previous Daily High	6.9054
Previous Daily Low	6.88
Previous Weekly High	6.9464
Previous Weekly Low	6.8934
Previous Monthly High	7.0764
Previous Monthly Low	6.9642
Daily Fibonacci 38.2%	6.8898
Daily Fibonacci 61.8%	6.8957
Daily Pivot Point S1	6.8721
Daily Pivot Point S2	6.8634
Daily Pivot Point S3	6.8467
Daily Pivot Point R1	6.8975
Daily Pivot Point R2	6.9142
Daily Pivot Point R3	6.9229

Author

Omkar Godbole

FXStreet Contributor

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

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