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Technical Analysis USDCNH : 2015-11-05

Yuan can become a reserve currency

IMF is going to have a meeting in November and revise the composition of the SDR currency basket. The date is not established yet. We assume that IMF can include the Chinese yuan in the list of the reserve currencies. Will this move support the yuan exchange rate?

The current SDR basket comprises of the US Dollar, the euro, the yen and the British pound and is valid till December 31, 2015. In August the IMF extended it till October 2016. In fact, the yuan can really be included in the list of the reserve currencies, but even in such a case renmenbi will not become a fully-valid reserve currency till the next autumn. The SDR basket is revised once in 5 years so last time it was in 2010. In our opinion, if yuan is included in the basket it may it gain share in the international trade and foreign exchange reserves of other countries. It such a case it will strengthen and is likely to have a bad impact on the Japanese yen exchange rate due to the increased competitiveness in the region. The important external trade data for October is to be released on November 8 in China. On November 11 the Chinese industrial production for October will come out.

USDCNH

On the daily chart USDCNH:D1 is in the neutral trend. The Parabolic indicator has formed the sell signal. The MACD gives buy signal yet. The RSI is neutral and below 50. The Bollinger bands are contracting which may mean lower volatility. In our opinion, the momentum may appear when the price surpasses the last fractal high, Bollinger band and Parabolic signal at 6.4 or in case of falling below the fractal low and lower Boolinger band at 6.31. Let the market choose the direction. Two or more positions can be placed symmetrically: having opened one of the orders, the second can be deleted as the market has chosen the direction. Having opened the pending order we shall move the stop to the next fractal high (short position) and fractal low (long position) following the Parabolic signal every 4 hours. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop-loss level without reaching the order, we recommend cancelling the position: the market sustains internal changes which were not taken into account

 

Position Sell
Sell stop below 6,31
Stop loss above 6,4

 

 

Position Buy
Buy stop above 6,4
Stop loss below 6,31


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