Key Points:
China’s stock markets surged post-Golden Week, with the CSI300 up 5.9% and the Shanghai Composite gaining 4.6%. However, despite this, the yuan remained under pressure as USDCNH held above 7.05.
Picture: USDCNH tests key support at 7.0480 as bearish momentum slows down, as seen on the VT Markets app.
USD/CNH closed at 7.05827, reflecting a mild drop of 0.15% during the session. The price fluctuated between a high of 7.08450 and a low of 7.04828, signalling relatively subdued trading activity within this range.
The pair remains below its key moving averages (5, 10, and 30-period), suggesting the bearish trend is still intact.
The 30-period moving average in particular is acting as a cap on upward momentum, while shorter-term averages signal potential sideways movement in the near term.
The MACD (12, 26, 9) provides further confirmation of weak momentum. With the MACD line trending just below the signal line and the histogram showing small positive bars, the recent bearish momentum has softened but remains a factor to consider.
Support is seen near 7.04828, the session’s low. If the pair breaches this level, it may target further downside, with 7.04000 acting as the next psychological support.
Resistance is found around 7.07000, which aligns with the cluster of highs from previous sessions. A break above this could suggest some recovery, but the overall technical setup remains cautiously bearish.
Given the current technical structure, we observe that the USD/CNH pair may continue to face downward pressure, especially if it struggles to reclaim its moving averages in the coming sessions.
The MACD’s recent softening might provide temporary relief, but unless the pair breaks through resistance, traders may need to brace for further consolidation or downside testing.
With the yuan posting its sharpest drop in 10 months, investor sentiment is wary, and traders are closely observing the People’s Bank of China (PBoC) and government policy directions.
The Chinese government recently pulled forward 200 billion yuan to support investment projects and local governments, but investors hoped for more concrete fiscal measures.
This uncertainty is keeping the US dollar in demand against the yuan, which has struggled to recover due to weak domestic growth indicators.
The USDCNH is testing key support at 7.05, with the potential to move higher if additional stimulus measures are delayed or if China’s economic recovery falters.
Adding pressure to the yuan, global industrial commodities like iron ore and copper also faced headwinds, further dampening investor confidence in China’s recovery.
Iron ore prices slid 5%, and copper hit its lowest in a week, both critical barometers of industrial activity, which dragged down market sentiment.
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The PBoC has room for monetary policy adjustments, but concerns linger about its ability to stabilize the yuan.
For USDCNH traders, the focus will remain on China’s policy direction and how global commodity trends impact the broader Chinese economy.
Should Chinese officials fail to implement more substantial fiscal policies, the pair may break further above 7.05, extending the yuan’s weakness.
Clarity on stimulus measures and China’s economic recovery remains crucial for the yuan. Should the government introduce more concrete measures, we could see some support for the currency.
Additionally, any signals from the People’s Bank of China (PBoC) regarding rate cuts or intervention could influence movements in the USDCNH, with resistance levels around 7.10 being key to watch.
Global commodity trends, especially in iron ore and copper, are also important indicators of China’s industrial health, which will directly impact the yuan’s performance in the coming weeks.
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