USD/CNH technical analysis: Looks south after head-and-shoulders breakdown

• USD/CNH's daily chart shows a head-and-shoulders breakdown. 
• The pair risks falling below 7.00 in the short term.

The USD/CNH pair is currently trading largely unchanged on the day at 7.0672, having dropped for the fourth consecutive day on Monday.

Notably, Monday's close at 7.0670 confirmed a head-and-shoulders breakdown on the daily chart. The bearish reversal pattern suggests scope for a drop to 6.95 (target as per the measured move method).

The breakdown is backed by a below-50 reading on the 14-day relative strength index (RSI). Further, the daily MACD histogram is charting deeper bars below the zero line – a sign of strengthening bearish momentum.

Even so, the pair is flashing green at press time and may revisit levels above the former support-turned-resistance of the neckline at 7.0750 before falling below 7.00, as suggested by the head-and-shoulders breakdown. Markets often crowd out weak hands (bears) after a major breakdown.

Daily chart

Trend: Bearish

Technical levels