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USD/CNH, HANG SENG INDEX - TALKING POINTS:

  • USD/CNH broke below the 200-day MA for the first time since June 2018.
  • USD/CNH will need to break below 6.70 to open the lower territory further.
  • The Hang Seng Index climbed above its 200-day MA and is testing 28,000.

Read our free trading guide for Q1 Equity Outlook.

USD/CNH BROKE BELOW the 200-DAY MA

The USD/CNH broke below its 200-day moving average on Jan 30, the first time this has happened since June 2018. The level was also in confluence with the Jul-2018 swing low. The Yuan pair is now facing pressure in both directions.

On the up side, the pair is testing the 200-day MA once again; the previous support zone of 6.74-75 has turned into a resistance. If it can climb above this level, it could find further resistance at 6.7760, where the downward trend lines converge with the July 31, 2018 low. Until it breaks above this level, the downtrend will remain for the USD/CNH.

On the lower side, the USD/CNH found support at 6.7010, the 61.8% retracement of the 2017-2018 drop; a morning star also formed. The PBOC’s reference rate released on Friday was set above this level as well. The pair will need to break below this long-term support to further open the 6.60-6.65 territory.

USD/CNH 1-Day Chart

USD/CNH, Hang Seng Index Broke 200-Day MA, First Time Since June 2018

The CNH is the Chinese Yuan traded in an offshore market, such as in Hong Kong, its largest offshore market. To find out more about the offshore Yuan, read our in-depth guide on What is the difference between CNH and CNY?

HANG SENG INDEX CLIMBED ABOVE 200-DAY MA

The Hang Seng Index, Hong Kong’s benchmark stock index, climbed above its own 200-day MA for the first time since June 2018. The equity index is testing 28,000, a key psychological level which converges with the MA and the 38.2% retracement of 2018's decline. If it can hold above this support level, it will further open the door to advance to 29,000, the next key psychological level in confluence with the 50% retracement of the 2018 decline.

Hang Seng Index 1-Day Chart

USD/CNH, Hang Seng Index Broke 200-Day MA, First Time Since June 2018

– Written by Renee Mu, Currency Analyst with DailyFX