- USD/CNY remains bid on signs of a slowdown in the Chinese economy.
- Technically speaking, the current rally is nearing exhaustion, so a pullback cannot be ruled out.
The USD/CNY is trading above 6.80 for the third straight day and was last seen trading at 6.82.
The Chinese currency weakened in early trade as the PBOC announced a weaker daily yuan fix and the PMIs published by the National Bureau of Statistics (NBS) signaled slower growth in the third quarter.
The concerns of an economic slowdown amid rising protectionist threats from the US could force China to shift focus from deleveraging to supporting the economy. As a result, further CNY weakness could be on the cards.
However, the daily chart is flashing signs of bullish exhaustion, thus, we could be in for a bear breather.
Daily chart
The back-to-back daily candles with long upper shadows validate the overbought conditions shown by the relative strength index (RSI) and indicate scope for a minor pullback.
The short-term moving averages (5-day, 10-day) continue to trend north in favor of the bulls. Hence, correction, if any, will likely be short-lived.
Resistance: 6.8389 (previous day’s high), 6.8440 (June 27, 2017 high).
Support: Support: 6.8154 (session low), 6.7978 (Friday’s low).
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