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USD/CNH Technical Analysis: Rally Stalls at Five-Year High

USD/CNH Technical Analysis: Rally Stalls at Five-Year High

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Talking Points:

  • USD/CNH Technical Strategy: Flat
  • Chinese Yuan Mounts Vigorous Recovery After Hitting Five-Year Low vs. US Dollar
  • Shooting Star Candle, Negative RSI Divergence Hint USD/CNH Top May Be Forming

The US Dollar may be carving out a top after rising to the highest level since January 2011 against the Chinese Yuan in offshore trade. The appearance of a Shooting Star candlestick coupled with negative RSI divergence points to ebbing upside momentum and hints that prices may be laying the groundwork for a downswing.

A break below wedge support at 6.5369 confirmed on a daily closing basis sees the next major downside barrier at 6.4974, 38.2% Fibonacci retracement. Alternatively, a push above the 6.5737-5859 area marked by the December 18 high and the 23.6% Fib expansion, paves the way for a test of the 38.2% threshold at 6.6237.

A Shooting Star candlestick – even with support from negative RSI divergence – represents indecision rather than a firm directional signal. With that in mind, we will opt against taking a trade and wait for further confirmation reversal. In the meantime, we remain flat.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.