On Friday, the ICE U.S. Dollar Index climbed to a 2-month high of 94.64, amid continued short covering. USD/CNH rebounded 0.6% last week, halting an 8-week decline.
This week, investors will focus on the release of China’s September official Manufacturing PMI (a slight improvement to 51.3 expected), Non-manufacturing PMI (edging down to 54.7 expected) and Caixin Manufacturing PMI (flat at 53.1 expected), all due on Wednesday.
On a daily chart, USD/CNH remains on the downside despite a modest rebound. The pair has formed a bearish double-top pattern and has broken below the neckline, signaling a bearish bias. The upside potential of the recent rebound is expected to be limited by the nearest resistance at 6.9200, which is the 38.2% Fibonacci retracement of the decline started in May, and a break below the nearest support at 6.7400 might trigger a further decline to test the next support at 6.6000. Alternatively, breaking above 6.9200 would suggest the pair has stabilized and the next resistance at 7.0200 may be challenged.