USDCNH to Slide Lower

USDCNH to Slide Lower

By: Oliver Miller | Where To Trade | On:21-10-2014 10:13
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Key Highlights

  • Bullish economic report from china
  • Strong USDCNH downward momentum picks up
  • Technical analysis align with the fundamentals
  • CNH to appreciate
  • Major down trend to continue

 

USD/CNH 

During the Asian session, we received higher GDP readings for china than expected this has led to the shorting of the USDCNH pair for the most of the morning session. A relatively strong report such as this is taken to be bullish for the Renminbi. We are looking to see the USDCNH pair side lower as New York opens and traders take the opportunity to get in on the action post the limited London reversal that the market has been experiencing.

In the medium term, we want to find out the pairs potential floors and the bias in direction that is technically evident. The USDCNH has been on a major down trend since 30th of May. From the highs of 6.26, we have fallen over 100 pips. This represents a strengthening of the Renminbi against the USD whilst the rest of the other currencies where weakening against the US dollar.

 

Major Support and resistance Levels

Support levels

  • The first major support level is ta the 6.120 Major level.
  • The next support is at 6.092 the low of the 7th of march
  • The furthest support is at 6.0142 which is the low of January and the yearly low.

Resistance levels

  • The closet resistance level is at 6.1300 major level
  • The next resistance level is at 6.1542, last week’s high
  • The furthest resistance is at 6.1600 major level

 

Technical indicators

The four hour chart

From the four hours chart, the 14 and 21 period moving averages are moving well above the candle sticks. This shows that the bearish momentum has picked up. We should therefore anticipate that the prices will move further down in the short term. The moving averages have also made a bearish cross further reinforcing the short term bearish view for the pair.

The stochastic, at 14.70 indicates that we are at oversold conditions and should anticipate some bullish reversal on the short term. However the RSI at 37.07 indicates that we are at neutral conditions. We can thus conclude that the current downward momentum will continue in the longer term after the bulls subside.

 

Where To Trade - USDCNH H4 21-10-2014

 

Daily Chart

From the daily chart, the 14 and 21 period moving averages are trading well above the candle sticks and have just made a bearish cross. This indicates that the medium term bearish momentum has picked up for the pair is likely to continue with its slip.

The stochastic with a reading of 16.66 indicates that we are at oversold conditions and should anticipate a bit of buying pressures as we slide lower. The RSI at 39.51 on the other hand, indicates that we are at neutral conditions. We can thus conclude that the current downward momentum will continue.

 

Where To Trade - USDCNH Daily 21-10-2014

 

Wrap up

The moving averages show that the USDCHN pair has a medium term and short term bearish bias. Though the stochastic in most time frames indicates oversold conditions, we should note that due to fundamental factors, it can stay in this region for a longer period. Also, we must note that the RSI indicates that we are at neutral conditions on most time frames. Under these conditions, a great trading approach is to maintain a bearish bias towards the pair and sell the tops.

Oliver Miller

Oliver Miller

"Patience is the key for success"

Oliver Miller is one of the best financial analyst with 18 years of online trading experience

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