- USD/CNH’s daily chart shows a bullish RSI divergence.
- The pair has exited a two-month-long falling channel.
Escalation of Sino-US tensions weighed over the Chinese offshore yuan (CNH) on Wednesday and pushed USD/CNH higher by 0.7%.
The uptick confirmed a bullish divergence (higher lows) of the 14-day relative strength index established on July 21. The positive divergence suggests a bottom is in place and the path of least resistance is now on the higher side.
The falling channel breakout seen on the daily chart is also echoing similar sentiment and so is Wednesday’s bullish marubozu candle, which comprises of big green body and little or no wicks. What’s more, the MACD histogram has crossed above zero in favor of the bulls.
As such, the pair looks set to challenge the former support-turned-resistance at 7.04 (June 10 low). At press time, the pair is trading in the red near 7.0067, having printed a high of 7.0172 early Thursday. The bullish bias would be invalidated if Wednesday’s low of 6.9641 is breached.