USDCNH went half way of my initial 1000bps target!

Hello everyone. I've published 'USDCNH testing previous low with potential 1000bps drop!' 17 days later, price dropped by 500bps, hitting key level of 6.38 mentioned in the post.

I'm posting this not trying to say how accurate I am. What I care is what's next? Will the Chinese yuan keep appreciate against dollar until say, 6.33, or even 6.25?

Technically, the pair has to violated the red downtrend line on the daily for reversal. Until then, I'm bearish on dollar.

What's the impact of rising CNH?

1. Support Chinese stock market to go higher, especially for listed companies which rely heavily on import.

2. More funds will be attracted to China onshore market via HK. I can see the huge amount of money flows into China A share market via the stock Connect scheme.

3. Rising too much will hurt Chinese economy, e.g. export business. I talked to some trade merchants whose profit dropped a lot as they receive dollar from overseas.

So, Chinese government is likely to halt the speed of CNH appreciation against dollar.

评论:

Chinese gov. raised reserve requirement for foreign currency deposit on May 31st. The news weighed on CNH. We can see that USD started to strength from that day. That combined with the news that fed is planning to sell of the corporate bond portfolio it amassed in the midst of the pandemic. Maybe , it's a big turning point for USD.