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Home » Forex Technical Analysis » USD/CNH Outlook: Positive Trend Persists Despite Early Decline

USD/CNH Outlook: Positive Trend Persists Despite Early Decline

  • January 2, 2025
  • 21

In early European trading on Thursday, the USD/CNH exchange rate was observed at approximately 7.3170, representing a decline of 0.29% for the day. The pair continues to maintain a positive outlook, remaining above the crucial 100-day Exponential Moving Average (EMA). The Relative Strength Index (RSI), indicating bullish momentum, supported this positive trend.

As the USD/CNH pair approached the 7.3170 level, it attracted selling pressure, although the potential for a significant drop seems limited. This outlook is bolstered by expectations of slower interest rate reductions in the United States throughout 2025 and the anticipated implementation of protectionist policies by the incoming administration.

Recent economic data from China revealed that the Caixin Manufacturing Purchasing Managers Index (PMI) showed weaker-than-expected performance in December. This resulted in concerns regarding a sluggish economic recovery for China, the world’s second-largest economy, which may pose challenges for the Chinese Yuan.

From a technical perspective, the bullish sentiment for USD/CNH appears robust, with the price consistently staying above the critical 100-period EMA. The RSI has also remained above the midline near 59.30, suggesting an upward trajectory may continue to dominate.

The market is watching the 7.3400 – 7.3405 price zone, which functions as an immediate resistance barrier for USD/CNH, reinforced by the upper boundary of the Bollinger Band. A successful breach of this resistance could lead to an upward movement towards 7.3697, last seen on December 31.

On the downside, the first support level for the pair is identified at 7.2974, coinciding with the low recorded on December 30. Should the downward trend persist, further declines may test the 7.2745 level, observed on December 13, with an additional critical level to monitor at 7.2588, marking the lower limit of the Bollinger Band.

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