Chinese Yuan (CN¥) Weakens With USD Gains

Chinese Yuan (CN¥) Weakens With USD Gains

China’s yuan weakened slightly against the U.S. dollar after the central bank fixed its official guidance lower for a second straight day since it made changes to the midpoint mechanism last Friday. The People’s Bank of China set the midpoint rate <CNY=PBOC> at 6.7971 per dollar prior to market open, weaker than the previous fix 6.7930. The weakness in the yuan midpoint followed the dollar’s broad gains overseas after British Prime Minister Theresa May’s Conservative Party appeared set to fall short of an expected majority in a general election.

The domestic foreign exchange market was unaffected by data showing producer price inflation eased for a third straight month in May, signaling a broader cooling in economic activity. economists at Goldman Sachs said on Friday that the recent surge in the Chinese yuan would not affect the currency’s medium term weakening direction and forecast the yuan to fall to 7.20 per dollar in 12 months.

Overall, the bias in prices is: Sideways.

Short term: Prices are stalling.

Intermediate term: Prices are ranging.

By the way, prices are vulnerable to a correction towards 6.85.

The projected upper bound is: 6.82.

The projected lower bound is: 6.77.

The projected closing price is: 6.80.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 2 black candles for a net of 4 white candles. During the past 50 bars, there have been 22 white candles and 23 black candles for a net of 1 black candles.

An inverted hammer occurred. If this occurs during a downtrend (which appears to be the case with FOREX CNY=) it implies a reversal. Look for a confirmation of the reversal on the bar.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

A shooting star occurred (a shooting star has a small real body near the bottom of the candle and a long upper shadow). During an uptrend the long upper shadow indicates that the bears are gaining control and a top may occur.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

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 39.9357. This is not an overbought or oversold reading. The last signal was a buy 4 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 21.82. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 115 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 -66. 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 19 period(s) ago.

Rex Takasugi – TD Profile

FOREX CNY= closed down -0.002 at 6.797. Volume was 48% below average (neutral) and Bollinger Bands were 196% wider than normal.

Open  High    Low    Close   Volume
6.795  6.803  6.794  6.797   1,113

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

Moving Averages: 10-period 50-period 200-period
Close:                       6.81           6.87           6.84
Volatility:                4                2                 3
Volume:                  2,442        2,291          2,114

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 0.7% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume out of CNY= (mildly bearish). Our trend forecasting oscillators are currently bearish on CNY= and have had this outlook for the last 15 periods. Our momentum oscillator is currently indicating that CNY= is currently in an oversold condition.

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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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