The USD/CNH exchange rate, which reflects the value of the offshore Chinese Yuan against the US Dollar, continues its upward trend for the second consecutive day. The currency pair received a boost following indications from former President Donald Trump that his administration is contemplating a 10% tariff on imports from China, set to take effect on February 1. This decision stems from the administration’s concerns regarding the flow of fentanyl shipments from China to North America.
While the proposed tariff is considerably lower than the previously threatened 60%, it adheres to Trump’s campaign promises. This announcement comes on the heels of a recent discussion between Trump and Chinese President Xi Jinping, where trade and fentanyl were at the forefront of their agenda.
In response to the looming prospect of a trade war, Chinese Vice Premier Ding Xuexiang warned of the dire implications such conflicts could have, underscoring that there are no actual winners in these scenarios as China braces for potential tariffs under the newly elected administration.
As the USD/CNH approaches the 7.3100 level, it is navigating within an upward channel, trading around 7.2820 in Asian trading hours. An examination of the daily trends suggests the possibility of continued upward momentum, although the 14-day Relative Strength Index (RSI) remains below the neutral level of 50, signaling ongoing bearish conditions. A rise in the RSI could indicate a shift towards a more bullish outlook.
On the support side, the USD/CNH pair is eyeing the psychological barrier at the 7.2000 level. However, to regain its footing within the ascending channel, it will need to overcome initial barriers near the lower boundary and the nine-day Exponential Moving Average, currently established at 7.3108.
