38.2% and trend line up ahead
The offshore yuan - USDCNH - has moved to new session lows and in the process is moving below the 100 day MA for the first time May 2016. I have the 100 day MA at 6.7884. The current price is at 6.7857. The pair has other support against the 38.2% of the move up from the 2016 low at 6.7777 and trend line support at 6.77259.
The USDCNH nearly reached the 7.000 level- peaking at 6.98696 on Tuesday. With the new US president taking office later in the month, the risk is certainly that Trump will be firing away at China as being a currency manipulator. There is also concern about a flood of capital outflows from domestic citizens. Earlier in the week there were reports that the PBOC was encouraging state-owned enterprised to sell foreign currency (buy yuan). The PBOC may also be intervening to push the currency higher (the USDCNH lower). Finally, Hong Kongs overnight rate moved up to a record 100% as well. That too encourages capital flows into the CNH.
All of which area reasons for the short squeeze in the CNH.
The shorts are feeling the pain but technically we are at support level for the currency pair. That can provide some support as shorts take some profit, but it can also lead to stops being triggered if the support area is breached. So be careful dip buyers. The selling can easily accelerate.