Tests 61.8% retracement

The USDCNH tumbled last week on the back of concerns the yuan was getting a bit too weak at it approached the 7.0000 level. The fall took the price from 6.98678 on Jan 3rd to 6.78187 on January 5th.

The low stalled near the key 100 day MA at the 6.7884 level (blue line in the chart above), the 38.2% at 6.7776, and an upward sloping trend line (see chart below).

Although the price tried to extend below the 100 day MA, the momentum below that MA line could not be maintained (see chart below). The other support targets (38.2% and trend line) were not broken.

Since that test on Thursday and the start of day on Friday (see chart below), the pair has ripped back higher.

In trading today, the price rotation higher, has extended toward the 200 hour MA and 61.8% retracement of the move lower at 6.9091 and 6.90850 respectively. Although the price moved above both those levels, we are seeing a slowing of the move higher.

What next?.

I would NOW expect that traders will look to lean against this key techincal levels with stops above new highs from today (the high reached 6.91259).

Typically, when the 100 and 200 hour MA are a distance apart - like they are now - there is a reluctance near the 200 hour MA. Combine the MA with a retracement level, and the level becomes a stronger resistance.

Where can the price go to next if the resistance does hold?

If the MA and retracement holds, the price could see a rotation to the 50% level at 6.88433 or even back down to the 100 hour MA at 6.8568.