• USD/CNH consolidates the biggest daily gains in a week.
• Weekly resistance line guards immediate upside, MACD hints at further weakness.
• 200-HMA, 38.2% Fibonacci retracement limits immediate downside.

USD/CNH extends pullback from intraday high as it drops to 6.7660 heading into Wednesday’s European session. In doing so, the offshore Chinese yuan (CNH) pair reverses from a one-week-old resistance line.

Given the bearish MACD signals and the pair’s reversal from the weekly hurdle, the latest pullback is likely to extend towards a convergence of the 200-HMA and 38.2% Fibonacci retracement (Fibo.) of July 13-14 upside, near 6.7600.

It’s worth noting that a downside break of 6.7600 could quickly drag the USD/CNH towards 50% Fibo. level near 6.7510.

However, an upward sloping support line from July 18, at 6.7475 by the press time, precedes the 61.8% Fibonacci retracement level of 6.7410 to restrict the short-term downside of the pair.

Meanwhile, recovery moves need to provide a clear upside break of the aforementioned weekly resistance line close to 6.7700, to lure the USD/CNH buyers.

Following that, the pair could rise towards 6.7880 and 6.7920 levels before directing the bulls to the yearly high surrounding 6.8385.

Overall, USD/CNH is likely to extend the recent weakness but the downside appears limited.

USD/CNH: Hourly chart

Trend: Further weakness expected