USDCNH Forecast – Yuan Hits New High

FxNews – In today’s USDCNH forecast, we will comprehensively analyze the pair, delving into its technical and fundamental aspects for a thorough understanding.

China’s Yuan Hits New High

Bloomberg—The offshore yuan has recently seen a significant appreciation, reaching around 7.15 per dollar. This is the highest it has been since late July. The increase is partly due to the weakening of the US dollar and the People’s Bank of China (PBOC) actions, which set a surprisingly strong midpoint rate for the yuan. Simply put, the midpoint rate is a reference the PBOC sets daily for the yuan’s value compared to the dollar.

On Friday, the PBOC raised this reference rate to 7.1151 per dollar. This adjustment marks the strongest setting for the yuan in over five and a half months. Additionally, there’s been a noticeable trend of corporations converting their dollar earnings back into yuan, providing further support to the Chinese currency.

Turning to monetary policy, the PBOC has decided to keep its one- and five-year loan prime rates unchanged at 3.45% and 4.2%, respectively. Market watchers anticipated this move. The bank’s decision comes as the latest economic data from October present a mixed picture, and authorities are evaluating the effects of recent stimulus measures on the economy.

Investors now focus on upcoming data regarding Chinese industrial profits and manufacturing activity. This information, expected next week, will offer new insights into China’s economy and potentially impact the yuan’s value.

USDCNH Technical Analysis and Forecast

We observe that the USDCNH’s decline has eased upon approaching the 7.12 resistance level. The price has positively reacted to this supply zone on two occasions: once on July 14 and then again on July 27. This resistance zone has been tested twice, and the RSI indicator provides additional evidence, suggesting that the pair is extremely oversold. This could signal an opportune moment for the bulls to step in, and as a result, we might see some corrections in the USDCNH price.

The USDCNH pair will likely surpass the 23.6% level of the Fibonacci retracement and aim for the 38.2% mark, provided the bulls can maintain the price above the 7.12 level.

However, if the 7.12 level is breached, we anticipate the decline will gain new momentum, leading to a further dip in the USDCNH price.