USDCNH stretched its seven-month old sell-off to the new year, diving to a fresh 2 ½ -year low of 6.438 on Monday.
Although the bearish market structure, which develops below the Ichimoku Cloud and the simple moving averages (SMAs), keeps sentiment negative, with the falling momentum indicators also keeping the risk on the downside, some stabilization cannot be ruled out in the near term as the price is eyeing a close below the lower Bollinger band.
The 78.6% Fibonacci of the 2018 – 2020 rally is currently underneath the price at 6,440 , providing an opportunity for a rebound, perhaps towards the 20-day SMA at 6.517. The 50-day SMA at 6.574 and the 61.8% Fibonacci of 6.603 could next attract attention if positive momentum further strengthens. Higher, it would be interesting to see if the price can successfully overcome the 6.633 resistance and fly above the Ichimoku Cloud and towards the 6.700 restrictive area.
In the negative scenario, a break below 6.440 may initially pause around 6.378 and then near 6.316, where the market action found both support and resistance in the first half of 2018. If this border fails to hold, the door will open for the 6.286 key zone.
Summarizing, USDCNH’s sell-off is potentially looking for a breather around 6.440 and a bounce towards the 20-day SMA. Failure to do so, could expose the market to additional losses, with support expected to occur next around 6.310.