USD/CNH Technical Analysis: Head-and-shoulders breakdown confirms bear reversal

The head-and-shoulders breakdown, as seen on the 4-hour and daily chart, indicates a bullish-to-bearish trend change, that is, the rally from the June low of 6.3828 has ended and the bears have regained control.
More importantly, it has opened the doors to 6.6840 (target as per the measured height method).
The oversold conditions indicated by the 14-hour relative strength index (RSI) could yield a re-test of the neckline resistance (former support) of 6.8212 before further downside unfolds. Only, back-to-back daily closes above 6.8212 would invalidate the bearish pattern.

Omkar Godbole FXStreet Contributor

4-hour chart

Spot Rate: 6.7930

Daily High: 6.8039

Daily Low: 6.7810

Trend: Bearish

Resistance

R1: 6.8056 (Aug. 8 low)

R2: 6.821 (neckline resistance)

R3: 6.8316 (5-day moving average)

Support

S1: 6.7877 (23.6% Fib R of 6.2353/6.9584)

S2: 6.7439 (ascending 50-day moving average)

S3: 6.7380(July 26 low)

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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