Sell-the-fact: USD/CNH drops as US-China tariffs kick in

• USD/CNH rallied in the last three weeks on fears of a full-blown US-China trade war (buy the rumor).  
• The biggest trade war in economic history began on Friday and USD/CNH is on the retreat, possibly due to profit taking or sell-the-fact trade.  

Currently, the USD/CNH pair is trading at 6.6283, having clocked a session high of 6.6658 earlier today.  

The offshore Yuan took a beating in the last three weeks and hit a seven-month high of 6.7329 on July 3 as markets priced-in a possibility of a full-blown trade war between the US and China.  

Sell-the-fact

The CNH began recovering lost ground after trade war became a reality on Friday. Trump imposed tariffs on $34 billion worth of Chinese goods and Beijing immediately responded in kind, kick-starting the “biggest trade war in economic history”.  

The sell-the-fact trade is seen gathering steam as the 14-day relative strength index (RSI) is still flashing overbought conditions.  

USD/CNH Technical Outlook

A close today below 6.6486 (Friday’s gravestone-doji’s low)looks like a done deal and would confirm a short-term bullish-to-bearish trend change.  

Support: 6.6130 (July 4 low), 6.5991 (38.2% Fib R of June 14 low – July 3 high), 6.5578 (50% Fib R of June 14 low – July 3 high).  

Resistance: 6.6658 (session high), 6.6861 (previous day’s high), 6.7329 (July 3 high).