- The US dollar has done very little during the trading session against the Chinese yuan, as we are hanging around the 7.11 level.
- This is an area that has been important multiple times in the past and is an area of support right around the weekly chart on the 1.10 price fulcrum.
- At this point, I think we are starting to ask questions about whether or not the global economy could come into play and perhaps in the US dollar higher.
- Again, remember the Chinese Yuan is considered to be a risk asset due to the fact that so many goods come out of China for the rest of the world. It's also not necessarily a free floating currency.
You have to be aware of that also. If the market can break above the 7.15 level, then it's likely that the US dollar goes looking to the 7.31 region. Underneath, if we were to break down below the 7.09 level, then I think you would start to see the US dollar fall pretty precipitously against most currencies. After all, the greenback is considered a safety currency and is traded as such. I believe that traders will continue to look to the USD if they are concerned about the global economy.
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Risk is a 1 to 1 correlation
Even if it's just the Chinese Yuan we are looking at, you have to recognize that has a lot to do with risk appetite overall. This is a market that tends to be very noisy and that's not a huge surprise. Ultimately, we have to look at this through the prism of how global trade is going. Recently, we've seen pretty poor numbers coming out of China and that may lend for more of a risk off or a bounce in this pair. So, keep that in mind as you trade this pair, as it has a lot of influence on the whole of Asia, being a proxy for longer-term trade momentum.
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