Nemo_Confidat

USD/CNH - LONG; China is dead!

Long
FOREXCOM:USDCNH   U.S. Dollar / Offshore Chinese Yuan
... and it is about to roll over. E.g. Sell it ALL!!
This is the year (2023) to start the Long March (a familiar theme in Chinese history), to gain full stride, right into oblivion.
Namely, the Chinese demographic implosion which has been gathering speed for quite a while now, will hit that country with undeniable force, essentially halving the population in less than the next decade and a half.
This pretty much sums it up. (Why do you think they had the severe "Covid lock-downs", lasting for 3 years by now?! ...)
Whether China will go down swinging is yet to be seen however, the outcome is a foregone conclusion, in any case. (Short of some oracle which could create 800 million Chinese, overnight, all between the ages of 21-35. China's current "R Factor" - reproductive rate - is half that of Covid and its varieties. - Just to illustrate the point.)

The technical picture of this pair speaks for itself, as well, the pair landing/turning on massive support here. (Beijing couldn't allow the further appreciation of the Yuan without crushing an already imploding economy!)

As for the monetary picture; China's >600% credit expansion in barely a decade is abjectly absurd, even by the recent, excessively loose global monetary standards.

p.s. China had never had more than 70 consecutive expansion - or even stable - years in its 4000 year, illustrious history. The time has come, once again, with a well defined end in sight.

Comment:
I am only including this for instructional purposes. I.e. Just a reflection
This was my single largest trade/position, ever, which I held for 7 months, the longest ever (but only by a few days).
This is to dissolve those misconceptions that FX could only be on traded and even that on the very short term. (Or that the CNH is a notoriously "slow mover".) Doesn't look like it, now does it?! ...
"Traders are like snipers. They lie in wait, take as long as it takes, and they are there for one, and only one, single reason: For the kill!"

This was the beginning of my post, 2 years ago;
Initially, I was undoubtedly early, and got out with a miniscule profit. Then, just watched and waited. Until ... (I put 1/2 of my total capital to work in this single position.)
There was also a a defining fundamental trigger/driver - accompanying the technical picture - for this move, where USD/CNH <:> VIX (the VIX weighted USD/CNH; included in that earlier post) had a massive break-down, indicating a massive de-levering in China, including the accompanying capital flight.

In summary, this pair had the most favorable technical picture (to go Long) accompanied by a defining - and lasting - fundamental driver!
E.g. there could be very little doubt about the extent and sustainability of the upcoming move.

p.s. To say that the Chinese are predictable would be the understatement of the century.
Comment:
Here is an other, brief case study - with description in the chart.
Comment:
As I was saying ...
This is just the beginning of the major move, though! - Keep that in mind.

Here is the other relevant post which factors in (chimes) with the one here.

www.tradingview.com/...line-of-rationality/
Trade closed: target reached:
This is just the beginning of a major move! ...
... but FLAT, for now. (All the action is in the NAFTA vs EU pairs.)
Comment:
Made a lot of money here, already :-)
This looks like the next likely scenario;
Trade active:
LONG
Trade active:
This is ready to continue it's journey up, up, and away!

As a side note; Following Xi's Moscow visit, not surprisingly Pyongyang announced that they are ready to send 900,000(!!) regular (including 50,000 Special Forces) forces to the Ukraine upon Putin's request. (BTW, Russian Diesel sales are up +40% since last year, the start of the war. Oil exports to India are also up +300% for the same period.)
Needless to say, close to 1 million N. Korean troops pouring into the Ukraine would end that war well before lunch. - Remember the Korean War?!
Comment:
According to the UN, India has now surpassed China (without Hong Kong & Taiwan) as the most populous nation on Earth. (Hence, the title: "China is dead")
Trade active:
XAU/CNH - Gold in Yuan;
SHORT, for now. - Then, massive Long, as indicated on the chart.
Comment:
The most recent Chinese, 25 year demographic forecast (population data, projected to 2048) estimates a Chinese population of 620 million, in the year 2049, a -56% decline! (... officially termed: "a catastrophic collapse" - as opposed to just a "demographic contraction", for obvious reasons.)
There could be found only 3 similar instances (such as: Egypt, "New Kingdom", etc.), in documented human history, where following such a population collapse, confined to a specific geographic region,during a proportional time interval, eventually resulted in a partial or full recovery of the local (indigenous) population - i.e., extinction avoidance. Placing the odds for a 5th Mllennia for the Chinese civilization/empire significantly below 50%.
Furthermore, the technological status (advancement level) of the state, at the time of the collapse, is inversely proportionate (power law) to the resulting fraction of the remainder of the population. (The "more advanced", the less likely to survive/recover, dependent on the speed of decline - most likely due to increased segmentation/specialization and the resulting sudden, irreplaceable voids in essential products and services.)
Trade active:
The price of Gold in Yuan;
SHORT, for now. (Then an upcoming, major long - the main move. There will be a lot of money to be made here, in the coming months!)
Comment:
Yuan is Collapsing
... right on schedule. Who could've foreseen this one coming?! ... ;-)
Comment:
In bound US money (capital) to China is being stopped, dead in it's tracks, for good.
This coming week whether by Executive Order (most likely) or by the US Congress, all new, capital investment bound to China will be subject to a ban or an "administrative review".
Industries affected;
Advanced Semiconductors - banned;
Quantum Computing - subject to notification/approval;
Artificial Intelligence - subject to notification/approval;
Investments affected;
ALL "new investments" (no order for divestiture; yet?)
Comment:
The PBOC (People's Bank of China) has spent the better part of last night "reassuring" the world that "we will do our outmost to maintain a stable exchange rate" while simultaneously dumping the Yuan - for $$ - with everything they got! - No one could accuse them of being shy or less than blatant.
So ...
A) When a Central Bank is compelled "to swear" to support the exchange rate ...
B) ... and when that central bank is the communist PBOC, no less! ...
If there ever was a confirmation of the mayhem to come, this would easily qualify.
Lean into this dog - Long like China is going out of business. (Which it just might.)
As an added bonus, China has defaulted - rather, simply walked away after less than 3 months! - from a ton of Russian debt (owed to Russia) due to their recent energy-Yuan-gold-Ruble exchange agreement. ("No thank you. We really don't want our Yuans back!" - Although they did say it cordially and they continue to like the ballet. ;-)
Comment:
No letting up in the Yuan's destruction! - And rightfully so.
This pair (CNH/JPY);
... is also ready to give up it's next 10%!
(Short "China everything" vs. Long Japan has been relentless for the past couple of months! - And as the mayhem continues the cash register just keeps on ringing! ;-)
Trade closed: target reached:
This was an uninterrupted ...
... +4.5% run and we milked it for every last pip!
Time to pause for the cause BUT ...

continue to lean into ...
... the CNH/JPY - SHORT, like there was no tomorrow. ( ... as there may not be one ;-)
Trade closed: target reached:
We have finished scaling out of our off-shore U$D/Yuan position, for now, ...
... following last night's rate cut by the PBOC.
(However, continue to press the established CNHJPY Short!!)
We caught - and milked - two, virtually strait moves here, first the Nov.-Jan. Short then the Apr.-Present Long for +7920 pips net, without issue.
This move however, is far from over as the PBOC's troubles are just getting started!
A) 1 year forward U D swaps are widening at a rapid pace;
B) Foreign currency receipts show no desire to repatriate (No one wants Yuans! - Including the Russians, who were kindly told earlier by Xi to just hang on to their $2+ Billion worth Yuan receipts - i.e., forget gold, USD, or any such in exchange, anytime soon. Oops, who could've seen that one coming?! ... ;-)
In short, this saga (pair) is just getting interesting and the RMB (off-shore Yuan) could crumble from this point forward far sooner and way deeper than most "FX specialists" care to speculate at the moment.
E.g., we are far from done with this pair, the only difference now is that we are flush with fresh cash. - And lots of it!
Remember; "cash is the same as an option!" and we'll be ready to jump back in there at a moments notice. (So far, this promises to be a rather tumultuous summer!)
Miller Time!
Trade active:
And we're back ...
... loaded LONG, once again. (7.25 is all but a foregone conclusion, to say the least.)
p.s. Just a gentle reminder; In FX there is no such thing as "overbought" or "oversold"!
Comment:
This thing barely had a hiccup at that 7.18 resistance before, once again, it is on it's way UP;
"There is a bad Moon arisin' ..." for China while all the rest of the planets are aligned to propagate one of the most spectacular regressions in modern history.
Remember the days when 7.00 was the "red line" for the USDCNH? ... No one does! - Anymore.
This is one of those rare instances when fundamental factors align perfectly with the technical picture. This is one pair - LONG - that one may want to bequest to one's children.
The demographic collapse hitting China is not some broad strokes, distant macro event anymore. It will accelerate like never before in the next 18-24 months to continue to a peak sometime in 2035. It is real, it is happening now and the consequences are far beyond anyone's reach or solution. China, in it's 4000+ year illustrious history has never gone more than 70 years without enduring what can only be termed as a crisis and a consequent, abject collapse. This time is no different.
In the words of Ma Bufang; "The West has made the enduring mistake throughout history, classifying China as a country, when in effect, it is a civilization."
... and when a civilization's fortunes take a turn for the worse (while certainly not due to some extraneous circumstances beyond anyone's control, in this case) ...
Monetize that!
Trade active:
Gold in Chinese Yuan;
To say that this looks ominous (for gold) would be the understatement of the decade.
massive SHORT

Now, unless the Yuan is about to stage a rally to end all rallies, vs. all else (and how likely is that? ... With stimulus being the constant motif of the day, week, month ...) ... The alternative being a severe sell-off in the PMs, with special regard to gold!

1) There is that perfectly formed Head-and-Shoulders - on the Daily;

2) Which has just broken it's neckline - right on schedule;

3) Having formed (precisely!) in the PRZ of a massive - Weekly - Bearish Gartley!

And as they say: "3 out of 3 ain't bad!"
"... and when you see it, you bet the farm!" - Stanley Druckenmiller

... and here is the Weekly;
Comment:
The PBC trying to defend the Yuan (although, they keep asserting: "we expect it to drop farther to new, record lows") by dumping their currency baskets, mostly the Yen, the Euro and the Hong Kong Dollar.
This entire move, for example, was due to the PBC;

as was this one;

They're right about that! - That the Yuan will keep dropping ... Yet, simultaneously, they keep trying to defend it. (That's the Chinese for you! Keep doing something obviously stupid and then try to justify it by saying: "We know!” ;-)
Bottom line is that the Yuan just keeps circling the drain, defense or not - as is always the case! -, and it's ever closer to a full surrender!
Comment:
While the main pair in this thread (USDCNH) is on a tear for quite some time now (with no end in sight!), it's cousin;
the CADCNH is now breaking out, decisively(!), following a 7 year sideways accumulation pattern. Also, considering the likely future strength of the CAD over the other "commodity currencies" (AUD, NZD; both heavily China dependent), LONG CADCNH is likely to have a comparable smooth run as it's daddy, the USDCNH.
Comment:
(Wait for it! ;-)

@arl_capital
Disclaimer

The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.