USDCNH Could Be in the Process of Topping for Now
USDCNH had been on a tear up until the beginning of this month, but the sharp decline off the high and subsequent rally is bringing into focus a potential topping pattern – Head-and-shoulders (H&S). The left shoulder and head are in place, just waiting on the right shoulder to develop.
With a break of the clean rising channel built over the past couple of weeks we soon see the right shoulder come to form. If it breaks it could offer traders a near-term trade down to the neckline that eventually turns into a larger trade on a confirmed H&S break.
To confirm the pattern the neckline does indeed need to break, so while the makings are there and a short-term trade could develop off a channel break, we can’t get too excited about its prospects just yet. These patterns can shape-shift and later look like nothing at all.
On the downside a channel break will target the neckline, while a neckline break will first have up the trend-line off the April low, followed by the 7-line. If neither break, then no trades to take from where I sit…
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USDCNH Daily Chart (H&S top?)
USDCNH 4-hr chart (watch for channel break)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.