Chinese Yuan Echos Japanese Yen: The USD/CNH (onshore Yuan) is mirroring the USD/JPY (Japanese Yen) weakness against the US Dollar. Both currencies are pressured, prompting intervention threats from their respective central banks.
Lagging Behind: While the Yen hits multi-year lows, the Yuan seems to be a step behind. This lag might be temporary.
USD/CNH Uptrend Intact: Despite a recent wobble, USD/CNH’s uptrend remains valid. A break below the uptrend support or the 50-week moving average would signal a potential reversal.
Ascending Triangle Pattern: USD/CNH is trapped in an ascending triangle pattern, hinting at a possible upside breakout in the future.
Trading Strategy: Until a clear break occurs, the recommended strategy is to:
- Buy dips: Look for opportunities to enter long positions when the price tests the uptrend support or the 50-week moving average.
- Stop-loss placement: Place stop-loss orders below the support or the moving average to mitigate risk.
- Resistance levels: Be aware of potential resistance zones around 7.28, 7.33, and 7.3650.
Wildcards:
- Chinese Intervention: China’s sizeable foreign exchange reserves allow them to potentially slow the Yuan’s depreciation through interventions.
- US Fed Policy: The Fed’s monetary policy stance significantly impacts the Dollar’s value. Increased hawkishness from the Fed could strengthen the Dollar and push USD/CNH higher. Conversely, dovish signals might weaken the Dollar and benefit the Yuan.
Overall, the USD/CNH is in a precarious position, resembling the pressured Japanese Yen. While the uptrend seems to be holding for now, a breakout from the triangle pattern or a shift in US monetary policy could significantly alter its course.