China’s yuan firmed against the dollar on Monday, supported by a stronger midpoint fix and as data pointed to more balanced supply and demand in the forex market amid Beijing’s tougher crackdown on illegal capital outflows. Traders expect more volatility for the yuan in coming months, however, amid mounting expectations that the greenback could strengthen again as the United States tightens monetary policy while China’s economic growth slows.
“The yuan is firm today, but going forward, much depends on the performance of the U.S. dollar,” said a trader at a Chinese bank in Shanghai, who declined to be identified. “After over five months of weakness, I expect the dollar index to strengthen again, which means there will be volatility in the yuan.” The People’s Bank of China (PBOC) set the midpoint rate at 6.7972 per dollar prior to market open, firmer than the previous fix 6.7995. The spot market opened at 6.8092 per dollar and was changing hands at 6.8113 at midday.
Also on Friday, China’s insurance regulator said it would continue its months-long crackdown on illegal sales of Hong Kong insurance products by mainland agencies which it said had led to asset outflows and even money laundering. Meanwhile, the global dollar index rose to 97.171 from the previous close of 97.164. Traders said that MSCI’s decision this week on whether to include China stocks into its emerging market index would have limited short-term impact on the currency market, with more attention being paid to China’s economic outlook and monetary policies.
The central parity rate of the Chinese currency renminbi, or the yuan, weakened 143 basis points to 6.7995 against the U.S. dollar Friday, according to the China Foreign Exchange Trade System.
In China’s spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.
The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
The Tourism, Sports Ministry and the China National Tourism Administration (CNTA) have agreed to set up a working group to exchange information in bid to crack down on illegal tour companies.
Phongphanu Sawetarundra, the Permanent Secretary of the Ministry of Tourism and Sports, disclosed that the two countries aim to reduce zero-dollar tourist scams and deter local nominees who might help the Chinese run businesses illegally.
The number of Chinese arrivals to Thailand during the first five months dropped slightly by five percent due to the crackdown on illegal tour operators.
That number is expected to increase however in the second half of the year and Thailand will welcome 9.5 million Chinese throughout this year, up by seven percent from last year.
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 6.84.
The projected upper bound is: 6.84.
The projected lower bound is: 6.79.
The projected closing price is: 6.81.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 24 white candles and 23 black candles for a net of 1 white candles.
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 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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 89.7561. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 10 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 41.16. 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 buy 2 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 102.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 7 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.
Rex Takasugi – TD Profile
FOREX CNY= closed up 0.005 at 6.815. Volume was 21% above average (neutral) and Bollinger Bands were 122% wider than normal.
Open High Low Close Volume
6.810 6.818 6.805 6.815 2,602
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 6.80 6.86 6.85
Volatility: 2 2 3
Volume: 1,530 2,229 2,066
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.
FOREX CNY= is currently 0.5% 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 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 21 periods.
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