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OFFSHORE CHINESE YUAN / U.S. DOLLAR

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CNHUSD trade ideas

$USDCNH DRIVES USD WEAKNESS BUT POSSIBLE MEASURED MOVE COMPLETEUSDCNH 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.
Long
by doejistar
USD vs Chinese Yuan - KEY LEVELPrice development of USDCNH is likely to set the tone for US Dollar for the entire market. As this is a sort of "Hidden dollar index" as its correlated with EURUSD . Right now we saw dollar bounce back as we hit yearly low. Most likely it was a fakeout - piercing through the 2019 low. If this week closes with a pinbar dollar most likely bounce back. The way chart looks now its LONG but it may change. Lets see where we close tomorrow. We need more definite signs as there are price inefficiencies (yellow zones, illiquid rides) both directions. Price is set to fill them. If we see accumulation below the yearly low - the drop will continue. Top Absolute Correlation 1 Week 1 USDCNH - XNGUSD -73.9% 2 USDCNH - EURUSD -72.6% ----------------------------------------- 3 USDCNH - XAGUSD -72.6% 4 USDCNH - XAGEUR -71.8% 5 USDCNH - EURJPY -70.5% ---------------------------------------------- 6 USDCNH - XAGAUD -70.1% 7 USDCNH - USDSGD 69.5% 8 USDCNH - USDPLN 69.1% 9 USDCNH - NZDUSD -68.7% 10 USDCNH - USDCAD 68.4%
by ICFX
ridethepig | USDCNH into the elections📍 USDCNH into the elections Oct 2020 Markets are moving quickly. Sellers completed the third wave target at 6.629x as widely expected. The pullback we are tracking in wave 4 is now brilliant proof of a lust to expand even further down. In the 2020 macro chart, we are ahead of schedule and a healthy pullback into the elections, followed by an exchange lower seems like the pragmatic play. Of course if you are short from above you have nothing to do but continue to add on pullbacks, but for those wanting to get closer to the flows, a leg back towards 6.85x seems highly likely. Thanks as usual for keeping the feedback coming 👍 or 👎
Long
by ridethepig
FX Update: Why the CNY is so strong. JPY waking up this morningSummary: The USD has weakened across the board and US long yields have risen to their highest level since June, unlike yield developments elsewhere. The strength in the Chinese renminbi needs a closer look as the fall in USDCNY accelerates, and the JPY is suddenly waking up this morning as USDJPY slips back below 105.00. Elsewhere, sterling complacency is creeping back into the picture. Trading focus: A breakdown of factors driving CNY strength The USDCNY move lower has continued apace, even accelerating in recent sessions after China recently removed a policy that was intended to limit speculation against the currency. The latest move has taken USDCNY well below the early 2019 lows and more than 7% below the highs from this spring. The move is not an accident and is driven by both fundamental factors and by the fact that China would only allow a directional move of this scale to develop if it is in the interest of its longer term agenda. So, a few factors that are driving the CNY higher and could continue to do so unless China decides that enough is enough (perhaps more likely now that the broad CNY basket is reaching the top of its multi-year band – allowing it to move more than another two percent higher would be an even louder signal). External stimulus and easing, relative domestic tightness – the PBOC has run a rather tight policy, to say the least, relative to the rest of the world, where the stimulus flood and chopping of interest rates has eroded fundamentals for foreign FX relative to the tighter domestic market in China and still very positive interest rates. As well, China had the luxury, as the world’s factory to allow foreign stimulus to provide powerful stimulus to its industries, whether for PPE or other goods. Long term interest in CNY stability – as the US-China divide and rivalry is likely to deepen over the longer term horizon, China needs to move away from its dependence on the US dollar and exposure to the weaponization of the dollar in global financial infrastructure and trade and needs to provide a stable and strong CNY to excite interest in capital flows back into Chinese asset – with China’s sovereign bond and other markets needing to deepen Biden presidency to ease pressure on China – this may be secondary and I am less convinced on this narrative, but there is a widespread belief that a Joe Biden administration will put less pressure on China than a “second term Trump unleashed” scenario. We’re not convinced, but Biden has criticized Trump’s tariff approach. Chart: USDCNH The USDCNH has now traded below the 2019 lows and the broader CNY basket at its current level is basically at the highs of the range since the spring of 2018. If China is unwilling to allow the CNY to continue stronger versus the basket, a weaker US dollar would have to do the heavy lifting and China might offset some of the pressure on its currency by buying other currencies in its reserve mix (a very opaque situation there as Chinese official reserves data has not moved in years). Further downside from here might require more pronounced USD weakness from here rather than broad CNY strength unless China is looking for a stronger currency across the board even from these levels. USD weak and US yields at long end rise to new multi-month highs The US dollar weakened yesterday on the same day that US yields rose to new highs, with much of the latter coming somewhat oddly overnight in the Asian session. The narrative driving this is apparently that stimulus will either come now or massively so later (under presumed Democratic clean sweep as odd solidify in that direction) and that this will drive US inflation rates higher and real rates lower. Democrat House Speaker Pelosi and the Trump administration are still negotiating despite yesterday’s declared deadline (from Pelosi’s side) coming and going. I am not fully convinced that this is the case and wonder if some of the bond weakness is down to the rise in bond volatility driving technical adjustments in bond portfolio allocations, whether in risk parity models or in basic ratioed portfolios as recent risky asset volatility has seen no offsetting upside in US treasuries. On that note, I am still skeptical of a major USD directional move unfolding until we get to the other side of the US election. The JPY wakes up this morning. Normally, with higher US yields we would not be looking for pronounced JPY strength, but the fact that US yields are moving independently of yields elsewhere is a bit novel and weak risk sentiment is providing a JPY boost as well – although that particularly cylinder has fired erratically at best for many months now. Regardless, USDJPY is having a poke below 105.00 suddenly this morning, a move that keeps the focus on JPY crosses and one that clashes with the recent USD weakening move as the JPY and USD have been tightly correlated in most crosses for years. Today’s G-10 rundowsn USD – I am not sold on the narrative and afraid of taking away too much from this USD weakening move – wouldn’t take much for the greenback to spoilthe latest attempt at making a directional statement. Longer term is a different matter, but we need to get to other side of election and would prefer a partial options position for now rather than high conviction spot trades. EUR – the euro running up to new highs, perhaps in part on the massive interest in the EU’s first social bonds issued directly by the EU in connection with the pandemic relief effort. Key technically for EURUSD to maintain above 1.1850 here to keep interest in a test toward 1.2000. But is market ready to get aggressive on a view on the USD before the US election result? JPY – a look at yields ex-US suggests that the JPY need not sweat the rise in US yields unless we see global long yields dragged higher still. Risk sentiment is likewise strong in EM carry trades, etc., but we’ll watch this USDJPY situation closely if we stay below 105.00 as traders may be complacent on hedging flow risks if the JPY rally move here broadens. GBP – sterling taking back about half of the recently lost terrain on the latest rhetoric and some sources suggesting that some of the UK position is theatre . The EU’s Barnier made flattering overtures on the UK’s sovereignty and said a deal is within reach in a speech this morning. CHF – no spin here – below 1.0700 in EURCHF needed to merit attention, and really below 1.0600. AUD – a popular short in the crosses as the RBA the only central bank able to gin up expectations of a significant shift in policy recently. That shift is likely large done. Further AUD downside would need a challenge to the reflation narrative, weaker global outlook, CNY to stop rallying, etc.. not to mention a technical break of 0.7000 in AUDUSD and 74.00 in AUDJPY. CAD – a relative winner in the crosses, but not much more range to work with to 1.3000, which my hold until we get to other side of election to see if the USD bears kicks off then. NZD – winning out relative to AUD on the RBA dovish shift, but hard time seeing significant room for further weakness in AUDNZD beyond another percent or two – watching 200-day moving average there at 1.0625 next. SEK – the krona has held in well during the recent Covid-19 resurgence and weaker outlook now for the EU, but looking for significant further EURSEK downside now a tough call. NOK – call us contrarian to further upside in EURNOK beyond 11.00 for now unless we get a new oil sell-off and more profound weakening in risk sentiment. John Hardy Head of FX Strategy Disclaimer The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. 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by Saxo
HOW TO TRADE LIKE THEM USDCNH BAREBACK So here’s the second pair in the bareback edition- bare chart assessment based on psychology and price and time action. This is a newly added pair to forex so I’d view the historical graph from saxo. The extreme is taking from that. And let me explain what this is. So high volume was added to get the pair moving maybe trillions of dollars as the candle takes up the length of the chart. So I drawn a trendline from the high of it to reflect that price broke the high that candle Thus this extreme line will serve as a guide as to the direction of the pair cuz just cus price broke above the line I feel we need to see how price response to the test before to say the pair is bullish. And we hit that confirmation. As I’ll explain. Now price traded above this line. Then we get our first high rejection of the pair. As this is extremely important very much. As and since this is a newly forex pair this mean one can take advantage of it and ride with the banks early in the game as we all know time is everything in forex and being involved in a pair as it develops it unparalleled in regards to it fruitfulness. So let me explain what’s is going on here as I’m already ready to join in this pair and you can too. Alright From the first top. We want to watch how price initially response to its first regression. Note we can see it’s a double top but note this we see weakness in the bearish action and strength in the bulls reaction. Look at the retrace. And note how price interacts with the extreme line(it resist the decline thus this is our sign the line is valued and its bullish as when price returned back up it went right through it with no reactions thus this is enough already to tell us HOW THEY ARE PLAYING THIS PAIR!!! But also note the retracement from the looks it’s deeper than the .7 and we know a retrace deeper than the .6 is a sign of strength from the retracer. But also note how the bulls response from this retrace. It pull back with strong candles and no bearish candle out the dip. And not only this but it cont to rise after. Now this is important as when we see price return from a dip as such this reflects exhaustion the markets and we see a rest in direction or in this case a bearish respond but not a decline. As price push below the poc and got pulled back into the range. Aka a fake breakout or if u use a vwap a wap pullback . This is a sign that the market isn’t ready for a sell. Ex usually in a range market we’ll see two range dips before the official sell. So one shouldnt expect to really short a pair without these dips as we see currently on many pairs now as audusd eurusd as these markets are not a sale they are reducing overbrought conditions meaning there was too many buyers in the market so the market sells to balance it so the can cont to push price higher Anyway so we see the bulls was able to push out the dip and continue to trade and when the bears came back and the bulls rest was short lived and the bull moved forward Now moving on we see several reaction to the first top so we made a line and this will be a poc as we can see the second top used it as support and is now resistance. So the second top is a parallel double top this means the market exhaustion itself thus we see the sell. Now note this sell is of weak momentum and is a fake out. How I know? Well if we have a range of candles all the same direction as in the first dip by time price broke through support or resistance we want to see momentum candles. What are they, as we see in the red drawling.they are larger candles with a shave head and long or high tail depending on the direction and we see them about 3 to 4 candles out . So we have about 5 or move candle with no momentum candle thus this sell is a correction in the direction Also looking at it the retrace is also a lil steep which is ok cuz the candle has weak volume .so we shouldn’t expect a reversal what to do now? And how to trade? We wait to see how price responds to the extreme area as this will be the first test (retest) as the first test is the best test as my teacher told me 🤷🏾‍♂️ and we are expecting a strong response this will be our long entry to hold and defend as price will continue to make new high.
by Donajor8