Trades with modest intraday gains, 50-day SMA holds the key for bulls

• USD/CNH edges higher on Monday and climbs closer to a multi-day-old trading range hurdle.
• The mixed technical setup warrants caution before positioning for a further appreciating move.
• A convincing break below the 50-day SMA is needed to support prospects for a meaningful fall.

The USD/CNH pair builds on Friday’s modest rebound from the 7.2595 region, or a nearly two-week low and gains some positive traction during the Asian session on Monday. Spot prices currently trade around the 7.2905 area, up over 0.10% for the day, flirting with the top boundary of a three-day-old range.

Looking at the broader picture, the USD/CNH pair is holding comfortably above technically significant 50-day, 100-day and 200-day Simple Moving Averages (SMAs), which, in turn, favours bullish traders. That said, oscillators on the daily chart are yet to confirm a bullish bias and warrant some caution before positioning for any meaningful appreciating move. Hence, any subsequent strength is more likely to confront a stiff barrier near the 7.3040-7.3050 region.

This is closely followed by resistance near the 7.3105 area, which if cleared should lift the USD/CNH pair towards the next relevant hurdle near the 7.3360-7.3365 region en route to the 7.3495 zone. Some follow-through buying beyond the 7.3500 mark should allow spot prices to challenge a multi-year peak, around the 7.3680-7.3685 region touched on September 8, which if cleared decisively will be seen as a fresh trigger for bullish traders.

On the flip side, the 7.2700 level now seems to protect the immediate downside ahead of Friday’s low, around the 7.2595 zone and the 50-day SMA, currently pegged around the 7.2435 zone. A convincing break below the latter could prompt aggressive technical selling and drag the USD/CNH pair below the monthly low, around the 7.2390 region, towards testing the next relevant support near the 7.2135-7.2130 region.

USD/CNH daily chart

Technical levels to watch