Traders seem non-committed, 7.2700 holds the key for bulls

• USD/CNH lacks any firm intraday direction and remains confined in a range on Tuesday.
• A sustained break and acceptance below 7.2700 will pave the way for additional losses.
• Bulls need to wait for a move beyond the 7.3000 before positioning for any further upside.

The USD/CNH pair struggles to gain any meaningful traction on Tuesday and oscillates in a narrow band, around the 7.2900 mark through the Asian session.

The People’s Bank of China (PBoC) has been persistently setting stronger-than-expected daily-mid-points for the Chinese Yuan, which, along with a modest US Dollar (USD) weakness, act as a headwind for the USD/CNH pair. The downside, however, remains cushioned in the wake of growing worries about the worsening economic conditions in China. Apart from this, expectations that the Federal Reserve (Fed) will keep interest rates higher for longer favour the USD bulls and suggest that the path of least hurdle for spot prices is to the upside.

From a technical perspective, the USD/CNH pair has been showing some resilience below the 7.2700 round figure since early last week. Hence, acceptance below the said level might prompt some technical selling and pave the way for an extension of the recent pullback from the highest level since April 2022, around the 7.3500 touched earlier this month. Spot prices might then turn vulnerable to accelerate the downward trajectory towards testing the next relevant support near the 7.2300 area en route to the 7.2200-7.2180 region and the 7.2100.

On the flip side, bulls might now wait for a sustained strength beyond the 7.3000-7.3050 region before placing fresh bets, above which the USD/CNH pair could aim to challenge the 7.3355 supply zone. Some follow-through buying beyond the YTD peak will be seen as a fresh trigger for bullish traders and expose the 2022 swing high, around the 7.3750 region with some intermediate resistance near the 7.3600.

USD/CNH daily chart

Technical levels to watch