$USDCNH DRIVES USD WEAKNESS BUT POSSIBLE MEASURED MOVE COMPLETE
USDCNH has been a strong driver of USD weakness and has weakened more that 7% over 5months, straight line.
Looking at the technical structure of the double top and breakdown right through the neckline levels, the measured move takes us down to where USDCNH put in a low last week at 6.627. Last week produced a reversal candle (though a weak one) closing around 6.665 just below the key 6.67 and 6.74 handles. There is momentum divergence on the lower lows and completes the measured move. Technically a strong case for a bounce here.
PBOC are getting concerned about recent USD weakness which could hurt exports and meeting inflation targets. They will act to achieve their targets and this pivot zone looks like a good reference level on how much they are willing to let the CNY appreciate against the USD. For now, the added uncertainty of US elections and what it means for escalating US-China tensions means market sentiment will lean on the cautious side and see some safe have demand, and some upward consolidation in USDCNH.
I don't have a position but keeping an eye on this as I engage in pro-USD trades.
Looking at the technical structure of the double top and breakdown right through the neckline levels, the measured move takes us down to where USDCNH put in a low last week at 6.627. Last week produced a reversal candle (though a weak one) closing around 6.665 just below the key 6.67 and 6.74 handles. There is momentum divergence on the lower lows and completes the measured move. Technically a strong case for a bounce here.
PBOC are getting concerned about recent USD weakness which could hurt exports and meeting inflation targets. They will act to achieve their targets and this pivot zone looks like a good reference level on how much they are willing to let the CNY appreciate against the USD. For now, the added uncertainty of US elections and what it means for escalating US-China tensions means market sentiment will lean on the cautious side and see some safe have demand, and some upward consolidation in USDCNH.
I don't have a position but keeping an eye on this as I engage in pro-USD trades.