USDCNH Sitting on Key Support

The recent sell off in USDCNH has seen the pair breaking down through the rising channel from YTD lows with price now testing the 6.4490 support level. This is a key level for the pair and has underpinned price action over the last three months. With indicators turned lower here and the Dollar trading on a weaker footing, there is risk of a break below the level which will see bears targeting the 6.4018 level next. While the CNH rally has been a little weaker over recent days as a result of softer Chinese data, there is plenty of room for the move to gather pace if we break support.

Key Data to Watch

The big data to watch for this trade is obviously the US labour reports tomorrow. With the Dollar trading on a weaker footing following Powell’s Jackson Hole comments, any negative surprises tomorrow will likely send USD on a continued course lower over the near term, squashing Fed tapering expectations for now. The market is looking for 750k on the NFP, with anything below that likely to see support break in USDCNH.