- PBoC’s reference rate strategy impacts USD/CNH.
- Technical analysis favors a bullish outlook.
- 7.1985 and 7.1899 crucial support for the pair.
In the latest developments in the foreign exchange market, the USD/CNH pair is experiencing a downward trend for the second consecutive session, trading close to the psychological level of 7.2100 during the Asian session on Friday. The People’s Bank of China (PBoC) has been consistently setting reference rates lower than model estimates, contributing to the pair’s losses. Notably, strategic maneuvers have been employed to fortify the offshore Yuan (CNH) by divesting from the US Dollar (USD) in the open market.
Immediate support for the USD/CNH pair is identified at the 23.6% Fibonacci retracement level of 7.1985, with additional reinforcement from the 14-day Exponential Moving Average (EMA) at 7.1899. A decisive breach beneath the 14-day EMA could exert further downward pressure, directing the pair towards the support zone near the 38.2% Fibonacci retracement level at 7.1772, aligning with the recent weekly low at 7.1748.
Technical analysis employing the Moving Average Convergence Divergence (MACD) for the USD/CNH pair signals a bullish outlook. The MACD line, positioned above the centerline, exhibits divergence above the signal line, indicating potential for an upward trend in the market. Buoyed by this optimistic sentiment, there is a prospect of the pair revisiting the weekly high at 7.2322.
Examining the 14-day Relative Strength Index (RSI), a lagging indicator, reveals a reading above the 50 mark, affirming the presence of robust momentum for the USD/CNH pair. The increased momentum could empower bullish forces to consolidate their position, potentially surpassing the weekly high and exploring levels near the psychological threshold at 7.2500.
Traders and investors are advised to closely monitor these technical indicators and support levels as the USD/CNH pair navigates the evolving dynamics influenced by the PBoC’s reference rate strategy and market sentiment surrounding the US Dollar and offshore Yuan.
Disclaimer: Please note that the viewpoints and perspectives expressed by the author, as well as any individuals referenced in this article, are intended solely for informational purposes. They should not be construed as financial or investment advice. It’s important to acknowledge that investing in or trading cryptoassets carries inherent financial risks.