USD/CNH pulls back from two-month highs

USD/CNH is reporting losses a day after hitting two-month peaks.
Markets seem to have priced in a better-than-expected US Q1 GDP, leaving the door open to sell the fact trade.
Dollar bulls need a big beat on the Q1 GDP reading.

Omkar Godbole FXStreet Contributor

USD/CNH has pulled back from two-month highs seen yesterday, snapping a four-day winning streak.

The currency pair is currently trading at 6.7418, having hit a low of 6.7282 earlier today. The spot clocked a high of 6.76 yesterday, a level last seen on Feb. 19.

The pullback from two-month highs could be associated with the broad-based weakness in the US dollar. The dollar index (DXY), which tracks the value of the greenback against majors, is currently trading at 98.14, having clocked an 11-month high of 98.32 yesterday.

Further, China’s President Xi’s assurances that his government would not pursue competitive devaluation may have weighed over the USD/CNH pair.

The dip, however, could be short-lived, considering the bullish technical setup and the pair may rise well above the high of 6.76 registered yesterday, if the US first-quarter GDP, due at 12:30 GMT, blows past expectations, alleviating recession fears, which have already receded over the past few weeks, as represented by the steepening of the yield curve.

The pair, however, may see deeper losses while heading into the weekend if the US GDP matches estimates or beats expectations by a narrow margin. This is because the markets seem to have priced in the possibility of an upbeat GDP reading by sending the dollar index to 11-month highs.

Technical Levels

1. R3 6.7905
2. R2 6.7752
3. R1 6.7626
PP 6.7474
1. S1 6.7348
2. S2 6.7195
3. S3 6.7069

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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