USD/CNH technical analysis: Rally stalls near 78.6% Fib

Short-term overbought conditions are likely capping upside in USD/CNH at key Fib hurdle of 6.9140.
A temporary pullback to 6.85 cannot be ruled out.

Omkar Godbole FXStreet Contributor

USD/CNH is currently trading at 6.8927, representing a 0.20% drop on the day, having struggled to find acceptance above 6.9137 (78.6% Fibonacci retracement of the drop from 6.98 to 6.6699).

The failure to scale the key Fibonacci hurdle could be associated with the overbought conditions reported by the 14-day relative strength index (RSI).

The pullback could be extended further to the ascending (bullish) 5-week moving average (MA), currently at 6.8582. The outlook, however, will remain bullish as long as the pair is holding above the 10-day MA.

On the higher side, key resistance is seen at 6.9242 (Dec. 21 high). A violation there would expose 6.95.

Daily chart

Trend: Bullish

1. R3 7.0152
2. R2 6.9669
3. R1 6.9395
PP 6.8912
1. S1 6.8638
2. S2 6.8154
3. S3 6.788

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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