USD/CNH technical analysis: Drops to head-and-shoulders neckline support

• USD/CNH has tested the head-and-shoulders neckline support of 7.0735. 
• A close below that level would confirm a breakdown and a bullish-to-bearish trend change.  

The USD/CNH pair has tested key support a few minutes amid the Sino-US trade optimism.

The currency pair is currently trading around 7.0841, having dropped to 7.0735 – the neckline of the daily chart head-and-shoulders pattern – soon before press time.

The bid tone around the offshore Chinese Yuan (CNH) strengthened in early Asia on a "Phase 1 Deal" between the US and China. With the partial deal, President Trump has delayed the planned Oct. 15 tariff hike.  That said, whether the tariffs in December will be pushed off as well.

As of now, however, the Yuan is mildly bid on the partial US-China trade deal.

A daily close below 7.0735 would confirm a head-and-shoulders breakdown and open the doors for 6.95 (target as per the measured move method).

On the way lower, the pair may find support at 7.03 (Sept. 13 low). A bounce from the neckline and a break above the 50-day moving average, currently at 7.1075, would weaken the bearish prospects.

Daily chart

Trend: Bearish below 7.0365

Technical levels