Looking at the technical picture of USD/CNH, we can see that, after moving sharply to the upside in the beginning of August, the pair hit its all-time high on September 2nd, which is at around the 7.1958 level. From there, the rate drifted back down, but failed to get below the psychological 7.0000 mark. Once again, USD/CNH tried to make its way back to the all-time high, but stalled near the 7.1680 barrier and took a deep dive during the early hours of the Asian trading session today. That said, we can see that the newly-established medium-term upside line managed to keep the rate above it. But given the pair’s proximity to the line, we will remain neutral for now and wait for a clear break through one of our levels, before examining a further directional move.
If the aforementioned upside line holds and the pair climbs back above the 7.1430 barrier, marked by yesterday’s intraday swing high, this may attract a bit of buying interest and USD/CNH could travel to the 7.1680 hurdle. That hurdle is near yesterday’s high, which initially may keep the pair from moving further north. The rate might even correct back down a bit, but if it stays above the 7.1430 territory, the buyers may still see it as a good opportunity to step in. If so, USD/CNH could bypass the 7.1680 area and target the all-time high, at around 7.1958.
On the other hand, if the previously-mentioned upside line breaks and the rate falls below this morning’s low, at 7.0985, this would confirm a forthcoming lower low and the pair would be placed below the 200 EMA on the 4-hour chart, which could also be seen as a bearish indication. We could then aim for the next potential area of support, at 7.0745, a break of which could set the stage for a further move down to the 7.0570 zone, marked by an intraday swing low of September 16th. USD/CNH might get a hold-up around there, or even correct back up a bit. That said, if the pair struggles to find its way back above the 7.0745 hurdle, this could lead to another round of selling, possibly bringing the rate to the 7.0570 mark, which if broken could clear the path to some lower levels. This is when we will aim for the 7.0300 territory, marked near the lows of August 15th and September 13th.
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