XM Group - Analytics

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    Technical Analysis – USDCNH bullish near 2-month highs

    USDCNH has been looking increasingly bullish since climbing above the 200-day moving average in early November. The pair had retraced around 75% of its gains following the yuan’s devaluation on August 11-12, to fall from its August 12 high of 6.5933 to a low of 6.3141 on October 12 and 30.

    Concerns about the duration and depth of China’s economic slowdown and increased capital outflows on lower interest rates outlook have driven USDCNH back higher over the past month as market-based reforms have allowed the yuan to follow the market forces more freely.

    Technical indicators are all giving bullish signals with the positive bias in the near term supported by the rising RSI and stochastics in the 4-hour charts. The longer-term outlook is also bullish as prices remain on an uptrend above the Ichimoku cloud and the 200-day moving average.

    However, prices appear to be meeting resistance just under 6.42 and a break above this level is needed to sustain the uptrend. On the downside, the Kijun-sen line is a clear support level at 6.4014. A drop below this level would neutralize the positive bias.

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