After hitting a major support level on its chart, USD/CNY rose 0.08% on Thursday. The price action seems to be affected by the release of the latest economic data in the US, along with a bounce in the oversold US dollar index.
At press time, the pair stood at 7.138 which meant a 2.46% gain in the Chinese yuan against the US dollar on a monthly basis. Today’s bounce in the pair was also driven by the disappointing industrial data in China. A 0.61% rebound in the DXY index further supported this trend.
However, most analysts remain bearish on the USDCNY pair for at least the near term as the stimulus measures from the Chinese central bank are expected to bolster the yuan further. The downtrend in the US dollar may continue for a while as the tightening cycle seems to be nearing its end.
The following chart shows a confluence of a historical support level and the 200 MA on the daily chart around 7.133. This level is a major support that justifies the ongoing price action. In the event that this level gets breached, the USD/CNY outlook will turn extremely bearish and may result in a major capitulation of the bulls.
