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USD/CNH Technical Analysis: Yuan Drops to Five-Year Low

USD/CNH Technical Analysis: Yuan Drops to Five-Year Low

Ilya Spivak,

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Talking Points:

  • USD/CNH Technical Strategy: Flat
  • Chinese Yuan Drops Most in Five Months, Hits Lowest Level Five Years vs. US Dollar
  • Opting to Pass on Taking Long Position on Risk/Reward Grounds, Intervention Threats

The US Dollar resumed its advance after a brief period of consolidation, rising to the highest level since January 2011 against the Chinese Yuan in offshore trade. Prices put in the largest single-day advance in five months.

Near-term resistance is at 6.6542, the 50% Fibonacci expansion, with a break above that on a daily closing basis opening the door for a test of the 61.8% level at 6.6847. Alternatively, a reversal back below resistance-turned-support at 6.6237, the 38.2% Fib, clears the way for a challenge of the 6.5737-5859 zone (December 18 high, 23.6% expansion).

The available trading range is too narrow to justify entering a trade on the long or short side from a risk/reward perspective. Furthermore, interventionist rhetoric from Chinese regulators opens the door for volatility disconnected from economic fundamentals, making for an uncomfortable trading environment. With that in mind, we will continue to stand aside.

Losing Money Trading Forex? This Might Be Why.

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