- The USD/CHN has rallied a bit from the 50-Day EMA.
- More importantly, we have also bounced from the 200-Day EMA, which of course is a longer-term indicator, and will attract a certain amount of attention.
- With this being the case, the market is likely to continue to be very noisy and slightly positive, but I also think it will be difficult to get above the 7 levels. The 7 levels of course as a certain amount of psychological importance attached to them, but it is also an area where we have seen significant resistance previously.
If we can break above there, then it does signal that the US dollar is going to go much higher. At this point, the market would likely see a lot of “FOMO” trading come back into the picture, and I would also point out that we may have a bit of an air pocket all the way up to the 7.2 level. However, you need to keep in mind that the Chinese do manipulate this currency, and are only allowed to operate in a specific band. In other words, the market really needs to get aggressive to the upside to see a reason to challenge the PBoC. Ultimately, this is a situation where we are squeezing between the crucial 7 level and the moving averages underneath.
US Dollar to Continue to Attract Attention
On the other hand, if we turn her on a break down below the 200-Day EMA, a kid in the US dollar back down to the 6.72 level, an area where we had formed a bit of a double bottom, that of course shows a significant amount of support. With this, I think it’s probably only a matter of time before we see that area hold and buyers come back in. If we were to break down below there, then it could open a move all the way down to the 6.50 level.
A lot of this is going to come down to the idea of whether the Chinese reopening can send China in a move overall that would be bullish for all things Chinese-related. We will have to wait and see how this plays out, but with the interest rate differential still favoring the Americans, and of course, the possibility that there remains more of a “risk off” type of situation out there, the US dollar looks as if it is going to continue to attract a certain amount of attention.
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