USD/CNH Technical Analysis: Digesting Near Two-Week Low

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Talking Points:

• USD/CNH Technical Strategy: Flat
• US Dollar in Digestion Mode vs. Yuan After Dropping to Lowest Level in 2 Weeks
• Fundamental Instability Warns Against Any CNH Exposure, Whether Long or Short

The US Dollar is locked in a quiet consolidation range having dropped to the lowest level in two weeks against the Chinese Yuan in offshore trade. The pair looks to be waiting for a new fundamental catalyst amid a lull in China-inspired risk aversion that emerged at the start of 2016.

Near-term resistance is at 6.6246, the 14.6% Fibonacci expansion, with a break above that on a daily closing basis clearing the way for a challenge of the 23.6% level at 6.6646. Alternatively, a turn back below the January 13 low at 6.5599 opens the door for a test of resistance-turned-support at 6.5215.

Current positioning does not offer an actionable tradesetup. Furthermore, the inherent instability of the fundamental landscape – where markets and Beijing authorities continue to play tug-of-war with the Yuan exchange rate – makes us inherently leery of any CNH exposure. As such, we will remain flat.

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