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USDCNH: Topping Signs Are Emerging, and the Dawn of RMB Appreciation Has Been Visualized

Inflation and RecessionForex Market
Summary:

With the US dollar weakening sharply, USDCNH may have peaked, maintaining a shock consolidation pattern in the short term. And the space left for the RMB to depreciate sharply has shrunk.

Sell USDCNH
EXP
EXPIRED

7.22000

ENTRY PRICE

7.02000

TGT PRICE

7.38000

SL PRICE

6.75134 +0.01851 +0.28%

--

Point

EXPIRED

7.02000

TGT PRICE

6.97899

CLOSING

7.22000

ENTRY PRICE

7.38000

SL PRICE

Fundamentals

Since the beginning of this year, under the situation of continuous tightening by the Federal Reserve, China's monetary policy has tended to be loose in order to stabilize economic growth, and the degree of inversion of Sino-US interest rate differentials is still expanding. At the same time, the frequent outbreak of pandemics in China has impacted economic recovery and export prospects, with the RMB depreciating sharply. Since entering November, the number of confirmed coronavirus cases in China is rising steadily, and the uncertainty of economic growth seems to have increased in the short term. Monetary policy is likely to remain broadly accommodative as it continues, and there is still pressure on the RMB to the downward slide.
However, amid slowing global economic growth, market speculation recently about the shift of the Fed's policy gradually fermented, the possibility of a slowdown in interest rate hikes in the future has surged significantly, and the dollar has shown signs of peaking and pulling back. While in the process of adjusting the RMB exchange rate, the People's Bank of China has issued a series of foreign exchange policies to regulate ratios including the foreign exchange deposit reserve ratio and foreign exchange risk reserve ratio, etc. The recent introduction of the “20 Measures to Upgrading Disease Control Measures” in China and the financial support measures for real estate will be conducive to the promotion of the stable recovery and development of China's economy. Therefore, under the premise that export trade remains active, the space for the RMB to depreciate may be limited.

Technical Analysis

Trading at the monthly chart, since 2008, USDCNH has generally maintained a wide oscillation pattern between 6.0-7.3, and the broadening formation has a tendency to expand, which is currently falling again near the top of the channel. Besides, the monthly line will most likely close down near the end of the month, for the first time after eight consecutive white bodies. The indicator RSI also turned downwards from the overbought zone. Therefore, the pause of the rally has not yet been excluded.
USDCNH: Topping Signs Are Emerging, and the Dawn of RMB Appreciation Has Been Visualized_1
Looking at the daily chart, USDCNH has now entered the topping stage, and the high level forms a "head and shoulders" pattern, which enhances the signal of the trend turning short. It is advisable to consider shorting on the high. If the rebound retreats to test the neckline around 7.25 without breaking, it is expected to drop again to the 7.00 mark.
It is recommended to try to go short on the price rally around 7.22, with the target set near the 7.00 mark below and the stop loss above 7.37.
USDCNH: Topping Signs Are Emerging, and the Dawn of RMB Appreciation Has Been Visualized_2

Trading Recommendations

Trading Direction: Short
Entry Price: 7.22
Target Price: 7.02
Stop Loss: 7.38
Support: 7.00/7.12
Resistance: 7.28/7.37
Risk Warnings and Investment Disclaimers
You understand and acknowledge that there is a high degree of risk involved in trading with strategies. Following any strategies or investment methodologies is the potential for loss. The content on the site is being provided by our contributors and analysts for information purposes only. You alone are solely responsible for determining whether any trading assets, or securities, or signal, or any other product is suitable for you based on your investment objectives and financial situation.

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Winkelmann

Analyst

7 years of stock market, foreign exchange, precious metal and other trading and analysis experience, based on fundamental, technical support, biased towards the top-down transaction logic, focusing on macro cycle and risk control, multi-purpose supply and demand theoretical prediction price Changes, balances the impact of transactions, chips distribution and market sentiment, and steady.

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