Chinese yuan strengthen slightly after tariff delay announced
The Chinese yuan rallied a bit against the US dollar during trading on Tuesday as the Americans announced that they were delaying tariffs against China as the two sides have decided to speak again via phone within the next couple of weeks. At this point, that gave quite a bit of hope for the People’s Bank of China to lower the fixing rate overnight.
There was a significant amount of attraction paid to the idea of the USD/CNH pair breaking above the 7 handle. We have reached back towards that level again, so now it’ll be interesting to see how the Chinese central bank reacts. It looks as if we are still very much in and uptrend though, and of course the psychologically important 7 handle will come into play. You can see that the Fibonacci retracement level of 50% was tested after this flash crash, and we have bounced a bit since then. Ultimately, the market is very likely to find buyers in this general vicinity, as even though we have signs of strength in the yuan for the day, we are still very much in and uptrend.
Keep in mind that there is a massive US dollars shortage out there for paying off debts, and this will continue to drive the value of the US dollar higher. Beyond that, the technical analysis looks rather strong. Yes, it was a very sharp move lower but that’s not that uncommon in this pair as you can see over the last couple of weeks. The fact that the buyers have come in at the 7 handle tells me that larger institutions are interested in buying greenbacks of this area as well. I see support all the way down to the 6.94 yuan level, as it features not only the 50 day EMA but it also features the 61.8% Fibonacci retracement level.
There was a significant amount of attraction paid to the idea of the USD/CNH pair breaking above the 7 handle. We have reached back towards that level again, so now it’ll be interesting to see how the Chinese central bank reacts. It looks as if we are still very much in and uptrend though, and of course the psychologically important 7 handle will come into play. You can see that the Fibonacci retracement level of 50% was tested after this flash crash, and we have bounced a bit since then. Ultimately, the market is very likely to find buyers in this general vicinity, as even though we have signs of strength in the yuan for the day, we are still very much in and uptrend.
Keep in mind that there is a massive US dollars shortage out there for paying off debts, and this will continue to drive the value of the US dollar higher. Beyond that, the technical analysis looks rather strong. Yes, it was a very sharp move lower but that’s not that uncommon in this pair as you can see over the last couple of weeks. The fact that the buyers have come in at the 7 handle tells me that larger institutions are interested in buying greenbacks of this area as well. I see support all the way down to the 6.94 yuan level, as it features not only the 50 day EMA but it also features the 61.8% Fibonacci retracement level.