Pressure is building on the Chinese yuan, which is back to a nearly three-month low against the greenback following disappointing Chinese inflation data and monetary policy easing by the People's Bank of China (PBOC).
The People's Bank of China (PBOC) announced on Friday that it will cut the reserve requirement ratio by 0.5 percentage points for most banks from July 15 to support the economy, which is hurt in the short term by rising prices and shortages of some inputs. The PBC said the move will free up about 1 trillion yuan ($154 billion) of long-term liquidity in the economy.
In terms of technical analysis, the outlook for USDCNH has been turning bullish since last month after the exchange rate started to bounce off the bullish oblique line that runs through the 2014 and 2018 lows (black in the chart).
The first resistance to watch will be the March high at around 6.58 and then the 2019 low at 6.67 exceeded late last year. Traders can look to enter long positions along the 20 day MA for a push towards 6.53 in the near run.
The bullish outlook would be technically invalidated in the event of a pullback below the June low at 6.35.
Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.