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TRADE IDEA:

BUY: US dollar vs Chinese yuan
14 August 2019

CURRENCY                               : US dollar vs Chinese yuan (USD/CNH)
TYPE                                          : Buy
TREND                                       : Up
PROBABILITY PREDICTION  : High
 

CHART ANALYSIS:

Looking at the weekly yuan chart (USD/CNH), you can see that the US dollar price has shot right through the 10-year resistance against the yuan at ¥7.00 per US dollar.

We can now expect the momentum of the buyers to flood the market which will take the US dollar price higher against the yuan.

To calculate the next target we’ll simply take the difference between the most recent high and low prices and add it to the high price.

Here is the calculation.

Target price = (High – low) + High
                       = (7.00 – 6.23) + 7.00
                       = 7.77

This means, our next target for the USD/CNH is at ¥7.77, which is an 11% decline for the Chinese yuan.

NEWS ANALYSIS:

Another 10% hike on $300 billion Chinese goods 

President Trump announced that on 1 September 2019, they would add another 10% tariff hike on $300 billion Chinese imported goods.The People’s Bank Of China then hit back and decided, for the first time in 10 years, to weaken their own currency past the symbolic ¥7.00 per US dollar.

This week we heard that the US has now decided to delay the imposing tariffs on some of the imports until the middle of December 2019. This includes products such as: mobile phones, laptops, video games and even certain clothing and footwear.

With a weaker yuan to the US dollar, this makes it more difficult for US companies to boost their exports.  

This could turn from a US-China trade war –

into a worldwide Currency War

President Trump may need to formally announce the end of the strong dollar policy that was introduced under former President Bill Clinton in 1995.

If this takes into effect, we can expect the US and China to continue to devalue their own currencies which will cause major economic problems where:

  • Investors will flee from the US dollar and into safe haven investments such as precious metals and crypto currencies.  
  • Millions of people will lose their jobs.  
  • There’ll be a major drop in GDP which could lead to the next major recession.

What are your thoughts on the Chinese yuan and where do you expect it to head next?

Let us know in our MATI Trader Chat Room by clicking here… 

Until next time, 

Trade well… 

Timon Rossolimos

Founder, MATI Trader

BEFORE YOU GO: What do you think of the trade of the day or what market would you like an in-depth analysis on next? Send us an email  to info@timonandmati.com or join our exclusive MATI Trader Chat Room by clicking here.