USD/CNH is dipping down for six weeks

USD/CNH is dipping down for six weeks

2020-09-01 • Updated

The Chinese yuan gained after the better-than-expected data. Today early at the morning China’s Caixin Manufacturing PMI came out 53.1, beating estimates of 52.6. The optimistic numbers have proved that the world’s second largest economy is steadily recovering from the virus slump. Notably, the pair has already been falling for the 6th week in a row, therefore the report has just added tailwinds to the yuan.

Moreover, the massive sell-off of the USD pushed the pair to the downside as well. The Federal Reserve made a surprisingly dovish statement on Thursday last week. The Fed will allow the inflation and employment to run above normal levels, leaving rates low for longer. The new approach has made the low-yielding greenback unfavorable for investors. Most analysts anticipate further decline of the US dollar.

It’s impossible to ignore the US-China complicated relationship. There was some sign of improvement after the report of the successful phone call between two countries last week. China and the USA have promised to obey the phase-1 trade agreement, that encouraged investors. Nevertheless, there is still some uncertainty ahead of the election of the US president in November, which may significantly affect Sino-American relations.

 Technical analysis

The 200-week moving average at 6.8100 has turned out the strong support for USD/CNH. The pair has immediately bounced off after a slight touch of this level. However, if it manages to break through it again, the way to the next support of 6.7500 will be open. In the opposite scenario, the move above the high of August 27 at 6.8900 will drive the price to the high of August 21 at 6.9250.

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