Having exceeded our long-term target around 6.8900 investors who had been aggressively selling the offshore yuan against the US dollar were in for a shock. With the RSI being as overbought as it had been at the previous two sharp peaks, last week’s bearish engulfing candle on record volume suggests an interim high is in place, mirrored by the slump in bullish momentum. The move was exacerbated by offshore dropping to minus 0.0110 versus mainland money and is probably also linked to its overnight deposit rate which soared from 1.5 to 11.5 per cent over the previous fortnight. Between now and year-end expect a pullback towards Fibonacci and trend-line support, the psychological 6.7000 worth watching; below 6.6400 is unlikely.
Nicole Elliott is a technical analyst