- It’s easy to see that the USD/CNH pair is bullish, and I do think at this point in time we will continue to see this pair follow the interest rate markets overall.
During the morning and Tuesday, it appears that the US dollar continues to strengthen against most things, and the US Dollar against the Chinese yuan won’t be any different. We are currently trading around the 7.30 level, which is of course a slightly major level, but I do think that given enough time we will eventually continue to go higher. Short-term pullbacks will almost certainly be offering opportunities based upon what the market is telling us, with a significant amount of support near the 7.2750 level. Underneath there, we have the 50-Day EMA that’s racing toward that level quite rapidly as well.
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On the upside, if we can break above the 7.31 level, then it’s possible that we continue to grind to the upside. Keep in mind that the People’s Bank of China sets a reference rate for the Chinese yuan, so it’s not like the pair trades freely. However, it does tend to follow the trend for quite some time, and right now the technical analysis certainly suggests that we should go higher.
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Every couple of years, we hear a plethora of stories about how the US dollar is going to lose its dominance. Quite often, we hear that is the Chinese yuan that’s going to replace it. The reality is of course something completely different but at this point it should be obvious that the US dollar is going nowhere, at least not in the short term. Furthermore, it certainly will be the Chinese yuan that replaces it.
This is a market that you continue to buy dips in, and you will be looking to find value to get long yet again. I have no interest in shorting this market, and I do look at any dip as a potential sign that the “US dollar is on sale.”
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