USDCNH Analysis: Be aware of false breakthrough

Fundamental Analysis of USDCNHUSDCNH Key Takeaways

• Fiscal policy of the PBOC: The PBOC has recently issued three offshore central bank bills totaling 120 billion yuan. The Ministry of Finance plans to issue a total of 12.5 billion yuan in RMB Treasury bonds in Hong Kong, China. The People’s Bank of China previously released the 2024 fourth quarter China Monetary Policy Implementation Report, pointing out that it will adhere to the market supply and demand as the basis, give play to the decisive role of the market in the formation of exchange rates, enhance the resilience of the foreign exchange market, and resolutely guard against the risk of overshooting of exchange rates.
• Chinese technology supports the RMB exchange rate: At present, global investors’ allocation to Chinese assets is still insufficient. Currently, foreign capital only holds 8% of Chinese stocks and 2.7% of Chinese bonds. Whether it is the Hang Seng Index or Chinese growth stocks, compared with the global average, the earnings growth is higher, but the price-to-earnings ratio is lower, and the valuation gap between the two is about 4.3 trillion US dollars.

Technical Analysis of USDCNH Daily and Hourly ChartsUSDCNH Daily Chart Insights

(USDCNH Daily Price Chart, Source: Ultima Markets MT4)

• Stochastic oscillator: The indicator slowed down its decline above the oversold area, suggesting that the short-term exchange rate decline may be blocked, so be alert to the emergence of a volatile trend.
• Support area: The green 200-day moving average is the key support price of the RMB in the near future, and it is also the year-on-year Fibonacci extension of the downward trend at the end of last year.
• Risk of false breakthrough: Yesterday’s exchange rate closed below, and today’s exchange rate trend is the key. If it continues to fall, the space below will be completely opened. Otherwise, we need to be alert to the probability of a false breakthrough today.

USDCNH H1 Chart Analysis

(USDCNH H1 Price Chart, Source: Ultima Markets MT4)

• Stochastic oscillator:During the Asian session, the indicator showed a bullish upward trend, but the exchange rate fell again. There is currently a bottom divergence pattern, so be alert to the risk of intraday reversal of the exchange rate.
• Resistance area: Although there is a bottom divergence pattern, based on the overall downward trend of the day, the exchange rate is still expected to continue the downward trend before breaking through the black rectangular box.

Pivot Indicator Insights for USDCNH

(USDCNH M30 Price Chart, Source: Ultima Markets APP)

• According to Pivot Indicator in Ultima Markets APP, the central price of the day is established at 7.2164,
• Bullish Scenario: Bullish sentiment prevails above 7.2164, first target 7.2407, second target 7.2472;
• Bearish Outlook: In a bearish scenario below 7.2164, first target 7.2054, second target 7.1989.

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