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Talking Points:

  • USD/CNH Technical Strategy: Flat
  • Bullish candlestick pattern hints US Dollar aiming higher vs. Chinese Yuan
  • Fundamental uncertainty, adverse risk/reward setup argue against exposure

The US Dollar may be preparing to turn higher against the Chinese Yuan in offshore trade after putting in a bullish Morning Star candlestick pattern. The greenback has failed to build on the setup thus far however, with prices seemingly waiting for a further catalyst to gain traction.

Near-term resistance is at 6.5505, the 14.6% Fibonacci expansion, with a break above that on a daily closing basis opening the door for a test of the 23.6% level at 6.5904. Alternatively, a reversal below the 61.8% Fib retracement at 6.4845 paves the way for a challenge of the 76.4% threshold at 6.4197.

Prices are hovering too close to near-term resistance to justify taking a long position from a risk/reward perspective. In broader terms, we continue to see it as imprudent to commit to CNH exposure against a backdrop of fundamental instability as the tug of war between Chinese officials and the markets continues.With that in mind, we remain flat.

Losing money trading in the FX market? This might be why.

USD/CNH Technical Analysis: Chart Setup Hints at Bottoming