The bid tone around the offshore Chinese yuan strengthened yesterday, pushing the USD/CNH lower by 0.53 percent, the biggest single-day drop since Jan. 30.
The yuan found takers after the official data released in the Asian session showed the world’s second-largest economy’s growth rate steadied at 6.4 percent in the first three months of this year, contradicting an expected slowdown to 6.3 percent.
Meanwhile, March industrial production growth printed well above 8 percent, beating the estimated rebound to 5.9 percent by a big margin.
As of writing, the USD/CNH pair is trading at 6.6816, representing marginal gains on the day. The gains could be extended further, but will likely be short-lived, as yesterday’s drop may have emboldened the bears.
As seen above, the pair fell 0.53 percent yesterday, validating the repeated rejection at the 50-day moving average (MA) seen over the last three weeks.
The 14-day relative strength index (RSI) has dived out of the ascending trendline and is currently biased bearish at 38.00. Further, the 5- and 10-day MAs are trending south, indicating a bearish setup.
As a result, the support at 6.6660 (trendline connecting Feb. 25 and March 21 lows) could soon come into play. A daily close below that would bolster the bearish setup, opening doors for a deeper drop.
The bearish case would weaken if the spot finds acceptance above the 10-day MA, currently at 6.7073, although that looks unlikely