USD/CNH: Remain Under Pressure Despite a Modest Rebound

China flag

On Friday, the ICE U.S. Dollar Index climbed to a 2-month high of 94.64, amid continued short covering. USD/CNH rebounded 0.6% last week, halting an 8-week decline.

This week, investors will focus on the release of China's September official Manufacturing PMI (a slight improvement to 51.3 expected), Non-manufacturing PMI (edging down to 54.7 expected) and Caixin Manufacturing PMI (flat at 53.1 expected), all due on Wednesday.

On a daily chart, USD/CNH remains on the downside despite a modest rebound. The pair has formed a bearish double-top pattern and has broken below the neckline, signaling a bearish bias. The upside potential of the recent rebound is expected to be limited by the nearest resistance at 6.9200, which is the 38.2% Fibonacci retracement of the decline started in May, and a break below the nearest support at 6.7400 might trigger a further decline to test the next support at 6.6000. Alternatively, breaking above 6.9200 would suggest the pair has stabilized and the next resistance at 7.0200 may be challenged.

Market chart of USD/CNH. Analysed in 2020

Source: Gain Capital, TradingView

Related tags: Forex CNY DXY China

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