- In my daily analysis of exotic currency pairs, the US dollar looks as if it continues to threaten the Chinese yuan, as the 7.15 level above is significant resistance.
- At this point in time, the market looks as if we can get above there, then the market could go much higher, perhaps reaching the 200 Day EMA.
- If we break above that indicator, I think you have a situation where traders will continue to jump into this market and try to push it to the 7.2250 level eventually.
A short-term pullback at this point in time could very well find the 50 Day EMA offering support, and if we could break below the 7.10 level, I think you’ve got a scenario where the market could drop down to the 7.0750 level, where ice even more significant support.
All things being equal, it looks as if we are in the midst of trying to completely turn around the trend, and with the interest rates in the United States rising, it makes quite a bit of sense that we would continue to see this play out.
Chinese Yuan and Risk Appetite
The Chinese yuan determines risk appetite for a lot of forex traders, as the Chinese economy is basically driven by exports, and that means of course that the global economy has a major influence on what happens on the mainland.
All things being equal, this is a market that continues to also pay close attention to the Chinese retail numbers, which has been a bit of a blight in China itself.
All things being equal, this is a situation where we continue to look at this currency pair through the prism of whether or not the global economy is expanding or not. If it is not, then the US dollar offers a lot of safety for traders as they throw money into the US Treasury markets. Furthermore, we have recently seen the Chinese give a little bit of a limp stimulus package, which may not be enough to save the economy.
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