Looking at the technical picture of the US dollar against the offshore Chinese yuan on our 4-hour chart, we can see that yesterday, the pair broke above its short-term downside resistance line taken from the high of May 12th. At the same time, the rate continues to trade above a short-term tentative upside line drawn from the low of May 31st. Yesterday, after testing the 200 EMA from underneath, USD/CNH reversed back down. That said, the pair continues to balance above both of those trendlines, meaning that the recent move lower might be classed as a temporary correction, before another leg of buying.
If the pair stays somewhere above both of the aforementioned trendlines and climbs back above the 6.410 barrier, marked by the high of June 4th and the current high of today, that may attract more buyers into the arena, potentially setting the stage for further advances. USD/CNH could then rise back to the current highest point of June, at 6.419, a break of which might set the stage for a push to the 6.427 hurdle, which marks the inside swing low of May 21st. If the bulls are still active, they may easily send the pair beyond the 6.427 obstacle and towards the 6.442 level, marked near the highs of May 20th and 21st.
Although the RSI is currently flat, it remains above 50. The MACD is also slightly on the flat side, but still sits fractionally above its trigger line and well above zero. The indicators continue to show positive price momentum, which supports the scenario discussed above.
Alternatively, if the rate falls all the way below both of the previously discussed trendlines and then drops below the 6.378 hurdle, marked by the low of June 10th, that may spook the bulls from the field for a while and might attract more bears. USD/CNH could slide to the 6.374 hurdle, a break of which may open the way towards the current lowest point of June, at 6.360. Slightly below it lies another possible support area, which could get tested, and that’s the lowest point of May, at 6.352.
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