Feb 21 (Reuters) - Sentiment for China's stock market, and the yuan, is shifting due to investor euphoria for Chinese AI companies and hints that Trump might forge a new trade deal. The outlook for USD/CNH is hence changing too; more longs may be forced to capitulate.
Thursday's dive through the 100-day moving average, currently at 7.2452, spooked USD-holders who unloaded to a low of 7.2314. While USD/CNH tentatively rebounded above that technical barrier early Friday, some longs are likely still caught and waiting for spikes to sell.
USD/CNH ebbed from its rebound high of 7.2553, last trading at 7.2473, as China stocks rally with Alibaba leading again, after its Q3 earnings beat. China's Premier Li Qiang on Thursday pledged more consumption-boosting measures soon, while the People's Bank of China vowed extra financial support for the private economy.
If USD/CNH ends Friday below the 100 DMA, the next support is between 7.2215-7.2222 where the 200 DMA meets the 38.2% Fibonacci retracement of the September-February rally to its record high. This key level should prove more resilient, but shorts will target it to break any lingering bullish convictions.
A potential catalyst for a breakdown to the 50% retracement at 7.1745 is U.S. Treasury Secretary Scott Bessent's scheduled call with his Chinese counterpart on Friday. If there are hints of U.S.-China trade talks being planned, the yuan will rally again.
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