Rejected at bearish 5-day MA, risks revisiting recent lows

USD/CNH looks set to revisit the weekly low of 6.8659.
A deeper drop looks unlikely as the US-China phase one deal was priced in advance.

USD/CNH is reversing lower from the descending or bearish 5-day moving average (MA) resistance and risks revisiting the weekly low of 6.8659.

The pair is currently trading at 6.8858, having faced rejection at the 5-day MA hurdle at 6.8907 a few minutes ago.

The failure to take out the MA hurdle has reinforced the bearish view put forward by the long upper wick attached to Wednesday’s candle and shifted risk in favor of a drop to 6.8659 (Tuesday’s low).

However, dips below that level could be short-lived, as the CNH may come under pressure due to “sell the fact” trade.

Markets have bought the offshore Yuan since the beginning of the fourth quarter of 2019 in anticipation of the US-China phase one trade deal. The pair has dropped from 7.1675 to 6.8659 over the last 3.5-months. Now that the deal is signed, markets may book out of long CNH positions, helping USD/CNH regain some poise.