USD: The sentiment has been bullish for a while as US CPI remains sticky. As the dollar gained strength. However, it became overpopulated with buyers, as evident from CFTC reports. So, it should take some trigger for those buyers to start covering their longs - a good potential for dollar downside. The CESI differential for USDCNH has been forming a decent divergence since February.
CNH: The economic data came out pretty mixed this morning. It seems the market focused more on slacking Industrial Production YoY and Retail Sales YoY as ChinaA50 closed the session with a sharp recovery, viewing the miss in data as another reason for stimulus from PBoC.
Technical & Other
- According to seasonals DXY should stay flat for the next 3 weeks
Setup: S(RTF) Setup timeframe: 4h Trigger: 15m Medium-term: Sideways Long-term: Uptrend Min target: range boundary Risk: 0.14% (0.5R<) Entry: Market
Trade closed manually
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Took profits as the market is near my target area and the price action shows rejection
Good call on this! The profit taking moves from the long USD positions happened. :D
Cherry94
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@weekendanalyst thanks, I've been wondering yesterday how come news keep stressing the dollar strength against yuan but in my charts the dollar keeps falling:D It turned out CNY/CNH was experiencing weakness so the CNH shrugged off strength in USD.
weekendanalyst
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@Cherry94, It all about the CNY daily fix. It was pressured towards the upper band of 2% tolerance from that fix.
Putting pressure on the Yuan against the Fix; anything further you will see a divergence between the CNY/CNH.
Cherry94
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@weekendanalyst so, when the market wants to sell more yuans than possible according to the 2% band, they let it it out on the offshore one cuz it's not rigidly regulated like the mainland one. Do I get it right?
weekendanalyst
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@Cherry94 it’s not as simple as that, the PBOC has access to both onshore and offshore currency and they can do open money operations to drain liquidity between the currencies to dictate how it moves.
But, in a general oversight, Yuan is weak against the dollar mainly due to the economic strength difference. Therefore, the weakness in Yuan.