USD/CNH Technical Analysis: Head-and-shoulders breakdown confirms bear reversal

• The head-and-shoulders breakdown, as seen on the 4-hour and daily chart, indicates a bullish-to-bearish trend change, that is, the rally from the June low of 6.3828 has ended and the bears have regained control.
• More importantly, it has opened the doors to 6.6840 (target as per the measured height method).
• The oversold conditions indicated by the 14-hour relative strength index (RSI) could yield a re-test of the neckline resistance (former support) of 6.8212 before further downside unfolds. Only, back-to-back daily closes above 6.8212 would invalidate the bearish pattern.

4-hour chart

Spot Rate: 6.7930

Daily High: 6.8039

Daily Low: 6.7810

Trend: Bearish

Resistance

R1: 6.8056 (Aug. 8 low)

R2: 6.821 (neckline resistance)

R3: 6.8316 (5-day moving average)

Support

S1: 6.7877 (23.6% Fib R of 6.2353/6.9584)

S2: 6.7439 (ascending 50-day moving average)

S3: 6.7380(July 26 low)