Could positive momentum on USD/CNY continue?

Risk overall continues to ebb and flow on US-China trade uncertainty and looks somewhat asymmetric, tilted to the downside, based on our view that the HK Bill if passed through the House of Reps could seriously complicate trade talks and the signing of Phase 1. Stock markets are on the rise, and the risk-on atmosphere is weighing on USD, JPY and gold.

Last week the US dollar made its the best performance in nearly 3 months against the Chinese Yuan. USD/CNY is likely to hold below 7.05/04 in the near-term with a possible decline likely to be limited around 7.00-6.95.

On other side, the technical indicators are constructive, and there appears to be near-term potential rally to the 7.06/08 resistance area (the highs since October's end). The dollar moved above its 20-day SMA for the first time since mid-October. Also on the 4-hour chart this SMA coincide to the middle line of the Bollinger Badns and the price broke above it. It may offer support now.

You should take in mind also China PMIs data at the end of the week. Another decline could seriously impinge on the soft landing narrative markets have been forming over the past few weeks and draw a market-negative reaction.