USD/CNH rises to fresh two-month high of 6.9403

• Offshore yuan dropped in early trade, pushing the USD/CNH to a two-month high of 6.9403.
• The PBOC set the yuan reference rate 43 pips weaker than Reuters' estimates of 6.9055 per dollar.

The USD/CNH pair rose to 6.9403 - the highest level since Aug. 16, reinforcing the bullish setup, as indicated by the pair's rebound from the ascending 5-day exponential moving average (EMA) yesterday.

At press time, it is trading at 6.9381, having hit a low of 6.9225 earlier today.

The overnight drop in the US stocks and the slide in the US dollar have failed to put a bid under the Chinese yuan, possibly due to weaker daily fix. The People's Bank of China (PBOC) set the yuan reference rate at 6.9098 - up 43 pips than Reuters' estimates of 6.9055 per dollar.

Looking forward, the pair may rise to 7 if the US consumer price index, due for release at 12:30 GMT, betters estimates.

USD/CNH Technical Levels

Resistance: 6.9584 (Aug. 15 high), 7.00 (psychological hurdle)

Support: 6.9016 (10-day EMA), 6.8861 (200-hour EMA)