From around the beginning of this month, USD/CNH has been moving sideways, but slightly narrowing its range. We can see that the pair is stuck between two lines, one upside and one downside. Both are short-term and somewhat tentative. The downside line is taken from the high of June 19th and the upside one is drawn from the low of June 21st. Both lines are mainly illustrative, because we will keep a close eye on our support and resistance levels, in order to establish a further directional move. This is why we will stay neutral for now.
If the pair gets another hold-up near the 200 EMA, reverses lower from there, breaks the aforementioned tentative upside line and the price falls below the 6.8700 hurdle, marked by the lows of July 15th, 16th and 18th, this could attract more sellers into the game. Such a move might send the rate to the 6.8610 zone, which held the pair from falling on July 11th. USD/CNH might stall there for a bit, or even correct back up a bit. But if it is not able to push back above the 6.8700 barrier, this could trigger another leg of selling. If the 6.8610 area is not able to withstand the bear pressure this time, a break of it could push the pair to the 6.8500 level, marked by the low of July 2nd.
On the upside, if rate accelerates and moves above the 200 EMA, breaks the previously-mentioned downside line and pushes above the 6.8915 barrier, marked by the intraday swing high of July 10th, this might open the door to some higher areas. The next potential target could be around the 6.9000 zone, which is the high of July 3rd. If it fails to keep the rate down, its break may lead USD/CNH to the 6.9100 level, marked by the high of June 19th.
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