The US dollar has initially tried to rally during the trading session on Friday but then turned around to form a bit of a shooting star and the psychologically and structurally important 7.00 CNY level. Ultimately, this is a market that measures risk appetite more than anything else and if we do pull back from the 7.00 level, the US dollar will probably drop down to the 6.95 handle, and then perhaps even the 6.90 level. Ultimately though, this is a market that measures massive amounts of risk, and if the US dollar falls it shows that we get a big “risk on” move around the world, not just in this pair.
A lot of this will come down to the US/China trade situation and whether or not we are moving forward. You can see that we have been grinding lower and significantly forming a bit of a down trending channel. We have recently bounce from the 50% Fibonacci retracement level and now sits just above the 200 day EMA. That being said we are making a series a “lower highs”, and of course “lower lows.” The last vestige of support could be the 200 day EMA or the 50% Fibonacci retracement level. Pay attention to the headlines because of things get good for risk appetite, this pair should continue to drop from here. Beyond that, it’s very likely that we will continue to see more of a grind lower as long as nothing too drastic happens. Unfortunately, it will only take one headline out there to turn things around. If the market were to break above the 50 day EMA then things stood start to shoot straight back up in the air in a bit of panic. Things have cooled down over the last several weeks though, so it’s very likely that we continue to drop.
A lot of this will come down to the US/China trade situation and whether or not we are moving forward. You can see that we have been grinding lower and significantly forming a bit of a down trending channel. We have recently bounce from the 50% Fibonacci retracement level and now sits just above the 200 day EMA. That being said we are making a series a “lower highs”, and of course “lower lows.” The last vestige of support could be the 200 day EMA or the 50% Fibonacci retracement level. Pay attention to the headlines because of things get good for risk appetite, this pair should continue to drop from here. Beyond that, it’s very likely that we will continue to see more of a grind lower as long as nothing too drastic happens. Unfortunately, it will only take one headline out there to turn things around. If the market were to break above the 50 day EMA then things stood start to shoot straight back up in the air in a bit of panic. Things have cooled down over the last several weeks though, so it’s very likely that we continue to drop.