USD/CNH Technical Analysis: Candle Pattern Warns of Top
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- USD/CNH Technical Strategy: Flat
- Bearish Candlestick Pattern Hints US Dollar May Have Established Top vs. Chinese Yuan
- Opting to Pass on Short Trade as Fed Rate Decision Threatens to Overturn Chart Setup
The US Dollar put in a bearish Dark Cloud Cover candlestick pattern, hinting a move lower against the Chinese Yuan in offshore trade may be ahead. Prices found a top after rising to the highest level in four months in what newswires have linked to pre-positioning for the FOMC policy announcement.
A daily close below the 76.4% Fibonacci expansion at 6.5254 paves the way for a test of the 61.8% level at 6.5043. Alternatively, a move above the 100% Fib at 6.5596 opens the door for a challenge of the 123.6% expansion at 6.5937.
Positioning is inconclusive at this point. Technically speaking, prices are too close to near-term support to justify entering short. From a tactical perspective, a strong inverse correlation between USD/CNH and the S&P 500 warns that the pair may turn higher in the event of risk aversion following the Fed rate hike. With that in mind, we will stand aside for now.
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