Chinese Yuan Chart Could Be More Important than the Nasdaq
The monster rally in
NDQ
stocks has obviously grabbed most people’s attention recently. However there’s also been a major shift in currency markets as the U.S. dollar slides.
That trend has paused for more than a month. Looking simply at the
DXY
, it’s not clear whether the decline is ready to continue. But DXY is two-thirds European (euro and sterling).
Today we want to look at another currency that’s not even a member of the dollar index: The
USDCNY
.
USDCNY consolidated under roughly 6.85 in the first half of September before breaking lower this week. That was a low in January, so it appears that old support has become resistance.
The news flow is also noteworthy because China just reported better-than-expected industrial production. Interestingly, the South China Morning Post ran an editorial yesterday titled “China should seize the moment to free up controls on the yuan to expand its international use.” Coming from an officially sanctioned publication, that seems to indicate Beijing is going to let the yuan appreciate. (Which means USDCNY goes down.)
Earlier in the month, Morgan Stanley predicted USDCNY will keep moving toward 6.6 by the end of 2021.
Meanwhile, headlines for the U.S. dollar are just the opposite. Our economic data has rebounded somewhat, but more than half the jobs lost to coronavirus remain lost. Meanwhile, Jerome Powell and the Federal Reserve will probably keep the dovishness coming at their meeting tomorrow.
Most people probably cannot trade USDCNY. However, gains in the currency have previously lifted Chinese Internet stocks like
BABA
and other members of the
HXC
.
We entered 2020 expecting money to flow to China after global indexes were changed. Despite the pandemic, that process has been playing out as expected. Could it even accelerate into year end?
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
NDQ
stocks has obviously grabbed most people’s attention recently. However there’s also been a major shift in currency markets as the U.S. dollar slides. That trend has paused for more than a month. Looking simply at the
DXY
, it’s not clear whether the decline is ready to continue. But DXY is two-thirds European (euro and sterling). Today we want to look at another currency that’s not even a member of the dollar index: The
USDCNY
. USDCNY consolidated under roughly 6.85 in the first half of September before breaking lower this week. That was a low in January, so it appears that old support has become resistance.
The news flow is also noteworthy because China just reported better-than-expected industrial production. Interestingly, the South China Morning Post ran an editorial yesterday titled “China should seize the moment to free up controls on the yuan to expand its international use.” Coming from an officially sanctioned publication, that seems to indicate Beijing is going to let the yuan appreciate. (Which means USDCNY goes down.)
Earlier in the month, Morgan Stanley predicted USDCNY will keep moving toward 6.6 by the end of 2021.
Meanwhile, headlines for the U.S. dollar are just the opposite. Our economic data has rebounded somewhat, but more than half the jobs lost to coronavirus remain lost. Meanwhile, Jerome Powell and the Federal Reserve will probably keep the dovishness coming at their meeting tomorrow.
Most people probably cannot trade USDCNY. However, gains in the currency have previously lifted Chinese Internet stocks like
BABA
and other members of the
HXC
. We entered 2020 expecting money to flow to China after global indexes were changed. Despite the pandemic, that process has been playing out as expected. Could it even accelerate into year end?
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
