China Currency Devalues the Yuan….How bad is it?

The biggest conversation in the trading committee today is China devaluing the Yuan last night.    Let’s look at the chart and see what is really going on instead of listening to the news.

Below is a weekly chart provided by eSignal.    The chart shows the relationship between the Chinese Yuan to the US Dollar.     If price goes up, it means the US Dollar got strong against the Chinese Yuan.   The inverse relationship also applies.

July 23, 2012, the USDCNH topped out at around 6.38107.    From that point, the Chinese CNH got stronger against the US Dollar until Feb 3, 2014.   At that point, we hit the bottom and the USD started to get stronger again.     March 16, 2015, we had a big drop in price that stabilized around the support of 6.20237.   Price decided to consolidate upward until last night.  There was a high probability of the USDCNH retesting the previous pivot high of 6.30000 with a minor resistance of 6.24420.

In one day, we retested the previous pivot high and went back to retest major resistance of 6.38107.  We have not broken it yet!     It will be interesting to see what if we break this resistance to go higher or hold it.

2015-08-11_china

NOTE:  This action influenced the other currencies in the region too.

If you would like to learn how to trade like an institutional trader or learn more about our multi-timeframe email alerts, go to www.ichimokutrade.com or email us at info@eiicapital.com

EDUCATIONAL USE: Commodity Futures Trading Commission, Forex, Futures, Equity and Options Trading has large potential rewards, but also has large potential risk and may not be suitable for everyone. You must be aware of the risks and be willing to accept them in order to invest in these markets. Do not trade with money you cannot afford to lose. This is neither a solicitation nor an offer to Buy/Sell. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this document. The past performance of any trading system or methodology is not necessarily indicative of future results. All information provided on the Blog is for educational purpose.

About the Author Manesh Patel