Chinese Yuan (CN¥) ⇨ US Dollar ($) (CNYUSD) China and The World’s Reserves

Chinese Yuan (CN¥) ⇨ US Dollar ($) (CNYUSD) China and The World’s Reserves

Chinese Yuan (CN¥) ⇨ US Dollar ($) (CNYUSD) China and The World’s Reserves

Credit Suisse has cut its forecast for the Chinese yuan as Beijing sharpens its focus on currency stability. The bank cut its 3-month forecasts for the yuan against the U.S. dollar (USDCNY) to 6.88 compared to its previous forecast of 6.98, and cut its 12-month forecast to 7.05 from 7.18 previously.

Here’s why the Yuan won’t be in line for the world’s reserve currency.
The Chinese never promoted it as a single reserve currency; now Western advocates have to reconsider their position. Because the dollar is so big and important, smaller countries were happy when the euro was launched to provide a counterbalance, if not to challenge the dollar’s position outright.

The euro ultimately provided that counterbalance, but never managed to dethrone the dollar as the world’s foremost reserve currency. The euro is used in 30 percent of all global payments, according to payment provider SWIFT; the dollar is still number one, at 40 percent. But what about the Chinese currency, the yuan, the one that investment bank HSBC (NYSE:HSBC) predicted would become the third-largest global trade currency by 2015 – is it the ultimate challenger to the dollar’s top status? Not so much.

Only 16 percent of Chinese trade is settled in yuan, or renminbi (RMB), and the share of global payments ranks sixth at only 1.78 percent, behind the dollar, euro, pound, yen, and even the Canadian dollar. To be fair, China’s leadership never called for the yuan to overtake the dollar. It was mainly Western cheerleaders like HSBC that looked at the country’s economic growth and applied it to the currency. Many pundits also thought the yuan would take a stronger role after Donald Trump’s election last November.

bank deposits in RMB in the so-called global clearing centers are also falling. In Hong Kong, for example, only 5 percent of all bank deposits are in RMB and 37 percent in dollars. This, however, is not a disappointment for the Chinese regime, but rather for their Western cheerleaders.

Overall, the bias in prices is: Sideways.

Short term: Prices are stalling.

Intermediate term: Prices are ranging.

The projected upper bound is: 6.90.

The projected lower bound is: 6.86.

The projected closing price is: 6.88.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 21 white candles and 26 black candles for a net of 5 black candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 20.5259. This is not an overbought or oversold reading. The last signal was a buy 0 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 43.86. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 100 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -94. This is not a topping or bottoming area. The last signal was a buy 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 4 period(s) ago.

Rex Takasugi – TD Profile

FOREX CNY= closed down -0.005 at 6.883. Volume was 44% above average (neutral) and Bollinger Bands were 45% narrower than normal.

Open    High    Low     Close   Volume
6.888   6.895   6.883  6.883  2,698

Technical Outlook
Short Term:                Neutral
Intermediate Term:  Bearish
Long Term:                 Bullish

Moving Averages:  10-period     50-period    200-period
Close:                        6.89              6.89              6.83
Volatility:                 2                    2                    3
Volume:                   2,066            2,323            2,155

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX CNY= is currently 0.8% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of CNY= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on CNY= and have had this outlook for the last 0 periods.

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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