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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CHINA YUAN
In the grander scheme of things, renewed sales in USD/CNH have kicked in this week after the rate staged a retest of the neckline of a longer-term double top pattern (see chart below). USD/CNH rejected the neckline, which happened to coincide with the 23.6% retracement of the move between YtD extremes, and has pulled back towards the cycle low of CNH6.7424.
- As the rate attacked the aforementioned neckline/Fibo retracement level, the RSI returned from oversold territory, but rejected the breakeven 50 level and headed lower again upon renewed sales, though without crossing back below 30. This suggests that the underlying downtrend is intact, with potential for an even deeper sell-off. Meanwhile, the MACD histogram has shown increasing convergence between the MACD line and the signal line over the past few days, warning of their potential crossover, which would give yet another clue that the rate is headed lower.
- As flagged before, CNH6.7424 remains the key near-term bearish target. A break below there would shift focus to the CNH6.67-68 area, which cushioned losses between mid-Feb and mid-Apr of 2019.
- While normally the PBoC could use its daily fixings of the central USD/CNY mid-point to rein in any sharp moves in the yuan, we have a whole week before fixings resume after Chinese holidays, with thinner liquidity having the potential to result in increased volatility.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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