USD/CNH is flashing green as PBOC fixed CNY midpoint at weakest since Mar. 15, 2017

• The USD/CNH or offshore yuan exchange rate is reporting gains at press time, having bounced off the ascending 5-day exponential moving average (EMA) earlier today.
• The People’s Bank of China (PBOC) set the CNY reference rate at the weakest level since Mar. 15, 2017.
• The CNY is forecast to pare losses over the coming year on hopes that trade tensions would subside.

Currently, the USD/CNH pair is trading at a session high of 6.9261, having bounced off from the ascending (bullish) 5-day EMA earlier today.

The pair seems to have picked up a bid in response to the weaker fix. The PBOC set the daily reference rate at 6.9072 – the weakest level since March 15, 2017 – and well above the Reuters’ estimate of 6.9009.

Technically speaking, the pair is looking north, having scaled key resistance of 6.8927 (Sept. 18 high) last week. The short-term EMAs (5-day, 10-day) are trending north in favor of the bulls. Further, the 14-day relative strength index (RSI) cleared the descending trendline last week and has turned bullish.

While the short-term bias is bullish, the FX strategists are expecting the Chinese currency to pare some losses in the next 12 months on hopes that risks from an escalating U.S.-China trade war and a deep sell-off in emerging markets will subside, a Reuters poll found.

USD/CNH Technical Levels

Resistance: 6.9584 (Aug. 15 high), 7.00 (psychological hurdle)

Support: 6.8989 (10-day EMA), 6.8861 (200-hour EMA)