The USD/CNH currency pair experienced a notable increase, reaching around 7.3140 during the Asian trading hours on Monday. This upward movement comes as the US Dollar strengthens amid growing concerns over a potential trade war, sparked by recent comments from US President Donald Trump. He announced plans to impose reciprocal tariffs on various countries by Monday or Tuesday, although the specific countries have not been disclosed.
The bullish sentiment surrounding the USD/CNH pair remains robust, particularly as it stays above the critical 100-day Exponential Moving Average (EMA). The presence of a strong Relative Strength Index (RSI) indicator further reinforces this positive outlook. Initial support for the currency pair is identified at 7.2688, which coincides with the low recorded on February 5. A significant break beyond this level could open the path to 7.3673, marking the high observed on February 3. However, traders should be mindful of the upper boundary of the Bollinger Band at 7.3595, which serves as an upside barrier for the pair.
The return of Donald Trump to the White House as the 47th President has reignited tensions between the United States and China. The ongoing trade war between these two economic powerhouses appears set to resume from where it was left off, with reciprocal policies likely to impact global economic dynamics significantly. The conflict had initially taken a pause following the signing of the US-China Phase One trade deal in January 2020. This agreement aimed to introduce structural reforms and modifications to China's economic and trade practices while attempting to restore stability and trust between the two nations.
The mention of reciprocal tariffs by President Trump has boosted the US Dollar's haven appeal, further contributing to the currency's recent ascent. In parallel, the onset of a crucial week for US inflation data is putting a check on gold price advances, adding another layer of complexity to market dynamics.
The RSI for USD/CNH stands above the midline near 55.00, indicating that the path of least resistance currently favors an upward trajectory for the pair. This momentum is supported by the RSI's position, suggesting continued bullish sentiment in the near term.