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  • USD/CNH’s 4-hour chart shows a bull flag, a continuation pattern.  
  • A flag breakout looks likely and could be followed by a move to levels above 6.80.

USD/CNH’s pullback from the April 25 high of 6.7596 has taken the shape of a bull flag on the 4-hour chart. It is a continuation pattern, which usually accelerates the preceding bullish move.

A 4-hour close above 6.7409 (upper edge of the flag) would confirm a bull flag breakout and create room for a rally to 6.8248 (target as per the measured move method). As of writing, the pair is trading at 6.7387.

A bull flag breakout looks likely as the 4-hour chart relative strength index (RSI) is already teasing a bearish channel breakout. Further, the 14-day RSI is reporting bullish conditions with an above-50 print.

What’s more, the pair violated a multi-month descending trendline last month, validating seller exhaustion  near 6.80, as signaled by multiple long-tailed weekly candles.

4-hour chart

Trend: Bullish