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Fundamentals

During the Asian session on Monday (June 26th), USDCNH traded around 7.2056 against the dollar, up 261 bps from the previous reading, which is currently trading around 7.2441. The USD index rebounded slightly yesterday and the RMB extended its depreciation. The problems with the RMB remain unresolved, but there are signs of easing. For one thing, the traditional dividend-buying season is gradually passing in late June. For another, although China's economy has not yet emerged from the quagmire, there are still signs of policy bottom. However, the economies of Europe and the US have also shown a gradual weakening trend, and the PMI in June has been significantly lower than expected. At present, USDCNH is bullish but not recommended to go long. It is suitable for finding key points to test short constantly.

Traders need to pay special attention to US inflation data on Friday and employment data during the week.

Data: Eurozone preliminary manufacturing PMI for June was 43.6, with 44.8 expected and 44.8 previously. Eurozone preliminary services PMI for June came in at 52.4, with 54.5 expected and 55.1 previously. The preliminary Markit manufacturing PMI for June was 46.3, below expectations of 48.5 and the previous reading of 48.4. The US Markit services PMI for June was 54.1 preliminary, with 54 expected and 54.9 previously. The purchasing managers' indexes of manufacturing and service industries released by Europe and the US in June are "undesirable", which indicates that inflation in Europe and the US will further decline in June, and their economic growth will "slow down", thereby weakening the value of European and American currencies.

Technical Analysis

Trading at the daily timeframe, the slope of the USDCNH ascending channel remains comfortable, but the MACD indicator is gradually approaching the overbought zone. The opening is narrowing, and the upward color is discounted. After a week of rapid upward movement of USDCNH, the exchange rate is already in the previous shoulder position, and the resistance in this area may be relatively large. If it breaks smoothly, the strong resistance above will move closer to 7.37. However,  unless there is great positive guidance, the breakthrough is still difficult to achieve. After the sharp rally, USDCNH is in a key resistance position, and the demand for a pullback exists. The initial support below is at the 7.19 line, and further support is at the 7.11 line.

It is not recommended for traders to chase long during the day, which can wait for the opportunity to sell short positions around 7.25, with the stop loss at 7.27. The first target is to see the 7.19 line for taking profit partially. After setting the remaining position to break even, the second target is to see the 7.11 line.

Trading Recommendations

Trading Direction: Short

Entry Price: 7.25

Target Price: 7.19

Stop Loss: 7.27

Support: 7.19/7.11

Resistance: 7.27/7.37