Hong Kong Dollar (HK$) Record Setting Low

Hong Kong Dollar (HK$) Record Setting Low

The Hong Kong dollar commemorated the 20th anniversary of the territory’s return to China with… a new low, breaking through HK$7.81 against the dollar for the first time in 18 months. Hong Kong’s currency has been weakening steadily this year since in spite of its strong dollar peg, local interest rates have failed to follow US ones higher.

The result is an interest rate gap between the two at its widest since the financial crisis of 2008, with one-month dollar Libor offering 1.224 per cent and its Hong Kong equivalent, just 0.467 per cent.

The yield pick-up is encouraging investors to use the Hong Kong dollar as the funding leg of a carry trade, say analysts, meaning they borrow in the currency, but swap the proceeds to invest in a higher-yielding one such as the US dollar.

Hong Kong’s peg has been in place since 1983 when it helped calm markets following tensions between the UK and China over how the city would be handed back to Beijing. The currency trades between HK$7.75 and HK$7.85 per dollar but in recent years, has tended to trade nearer the strong, HK$7.75 end, of the band.

On Monday it breached HK$7.81 for the first time since January 2016 when global market turmoil, initially triggered by worries about China, sent it spiking briefly. Over the past 20 years, it has only traded over HK$7.80 on a handful of occasions, and never for long.

Technical Analysis

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 7.79.

The projected upper bound is: 7.82.

The projected lower bound is: 7.80.

The projected closing price is: 7.81.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 31 white candles and 17 black candles for a net of 14 white candles.

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.

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 36.0894. This is not an overbought or oversold reading. The last signal was a sell 2 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 60.51. 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 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 11. This is not a topping or bottoming area. The last signal was a sell 3 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 1 period(s) ago.

Rex Takasugi – TD Profile

FOREX HKD= closed up 0.000 at 7.808. Volume was 99% below average (consolidating) and Bollinger Bands were 39% wider than normal.

Open   High   Low    Close  Volume
7.808  7.809  7.807  7.808 110

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

Moving Averages: 10-period  50-period  200-period
Close:                       7.81            7.80            7.77
Volatility:                1                  1                  0
Volume:                  7,576         8,436           7,506

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 HKD= is currently 0.5% above its 200-period moving average and is in an upward 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 HKD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on HKD= and have had this outlook for the last 116 periods.

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Ivy Heffernan

Ivy Heffernan, student of Economics at Buckingham University. Junior Analyst at HeffX and experienced marketing director.

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