Yuan weakness is not being confirmed by divergent Dim Sum bondsUSDCNH may be due for a correction towards 6.60.
The Yuan has weakened to 6.70 per dollar and the pair appears overbought on a weekly and daily basis. Having failed to provide a confirmatory close above this key level, we may see a correction towards the 38% Fibonacci retracement level standing at 6.6056
In the meantime, the highly correlated Dim Sum bond ETF (inverted) has failed to make higher-highs in sync with the USDCNH rate's attempt. Combined with negative RSI divergence on the weekly chart, it may be foolish to buy before we see confirmation from the bond market or technical retracement to 6.6056 or lower.
Disclosure: Long USDCNH remains one of my high-conviction ideas and has been a core position
