Yuan close to yearly lows
|Currency Wars are no longer a hot topic right now. Trump's administration is probably happy with the recent weakness of the Dollar so they are not picking this topic up in the interviews and speeches. In this environment we see that since the beginning of the year, Yuan is getting stronger against the USD and we are very close to make new yearly lows. What is the future of this trend?
From the technical point of view we have signals promoting both scenarios: bearish and bullish. When I weight them against each other I see that bulls have a bit bigger chances in the long term. What are the bearish signs here? Well first of all, we broke the long-term up trendline (black), which itself can be considered by some traders as a sell signal. What is more, we are in the channel down formation (red lines).
On the other hand (bullish), this channel down can be considered as a flag and in the same time as a trend continuation pattern. When I see at the length of the trend and the length of the recent correction I think that flag will be a more appropriate name here, especially that we are still above the 38,2% Fibo so talking about the channel down formation would be too early here. Furthermore, we are still above the 6,72 (upper green) support and I think that this will be an important one and should keep the bullish dream alive.
The short-term scenario is a test of this (6,72) level, so we can go lower in the next few days. What will happen next? Depends from the price action there but in my opinion there is still a bullish potential here in a long-term, at least as long as we stay above the 38,2% Fibonacci (second green area).
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