As policies continue to diverge…
For readers who have been following us right from our first ever TradingView idea, you’ll recall our first ever trade idea on long USDCNH. It’s been a fun 5 months writing and sharing our thoughts with the community.
Much has happened since April, but two critical things stayed the same. The US Federal Reserve remains hawkish, raising rates, while the PBoC remains dovish, continuing with its easing stance. The result? USDCNH trading beyond the 6.9 level, surpassing both our target levels.
With the next Federal Reserve meeting coming up, we think it’s time to review this idea again. The CME FedWatch Tool allows us to gauge what market participants are expecting the Fed to do. The prevalent consensus seems to be that the Fed is likely to raise rates till the end of the year before holding rates at the 3.75 – 4.00 % level for the next year.
On the other hand, the PBoC has continued to ease, cutting reserve requirement ratios & lowering its medium-term lending facility. With China still battling Covid via lockdowns, persistently low inflation numbers, and weak economic numbers, we see further easing on the cards from PBoC.
Looking at the charts, the USDCNH pair has just completed a symmetrical triangle chart pattern. After breaking out to the upside and a brief pull-back, prices continued upwards with strong momentum. Using classical charting techniques, the target levels for the breakout can be set to the distance of the high and low of the symmetrical triangle and applied to the top of the triangle. With the target price of 7.1180, there is still upside for this trade.
It seems that policy divergence will remain for these two major economies, which is likely to strengthen the USD and weaken the CNH further, driving up the USDCNH pair. Using technical to identify target levels where we will be comfortable, we think that there is room for more upside.
Entry at 6.9500, stop at 6.8545. Target at 7.1180.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/gopro/
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
Reference:
cmegroup.com/trading/interest-rates/countdown-to-fomc.html
Much has happened since April, but two critical things stayed the same. The US Federal Reserve remains hawkish, raising rates, while the PBoC remains dovish, continuing with its easing stance. The result? USDCNH trading beyond the 6.9 level, surpassing both our target levels.
With the next Federal Reserve meeting coming up, we think it’s time to review this idea again. The CME FedWatch Tool allows us to gauge what market participants are expecting the Fed to do. The prevalent consensus seems to be that the Fed is likely to raise rates till the end of the year before holding rates at the 3.75 – 4.00 % level for the next year.
On the other hand, the PBoC has continued to ease, cutting reserve requirement ratios & lowering its medium-term lending facility. With China still battling Covid via lockdowns, persistently low inflation numbers, and weak economic numbers, we see further easing on the cards from PBoC.
Looking at the charts, the USDCNH pair has just completed a symmetrical triangle chart pattern. After breaking out to the upside and a brief pull-back, prices continued upwards with strong momentum. Using classical charting techniques, the target levels for the breakout can be set to the distance of the high and low of the symmetrical triangle and applied to the top of the triangle. With the target price of 7.1180, there is still upside for this trade.
It seems that policy divergence will remain for these two major economies, which is likely to strengthen the USD and weaken the CNH further, driving up the USDCNH pair. Using technical to identify target levels where we will be comfortable, we think that there is room for more upside.
Entry at 6.9500, stop at 6.8545. Target at 7.1180.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/gopro/
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
Reference:
cmegroup.com/trading/interest-rates/countdown-to-fomc.html
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