Researcher at UOB Group Quek Ser Leang gives his views on the recent depreciation of the Chinese Yuan (CNY).
Key Quotes
“The price action for USD/CNY in the month of August 2019 registered a couple of ‘historic’ milestones. Not only is the one-month gain of +3.94% the largest since 1994, the one-month range of 2882 pips is also the largest since 1990″.
“In Aug 2015, when USD/CNY rocketed and gained +2.67%, it subsequently traded within the Aug range of 6.2075/6.4486 for three months before surging ahead and touched 6.9592 in Dec 2016. What is notable is that despite dropping sharply from 6.9592, USD/CNY never moved back below the Aug 2015 low of 6.2075. Similarly, the Jun 2018 low of 6.3828 and the May 2019 low of 6.7316 remain intact until today. Looking forward, the Aug 2019 low of 6.8825 could possibly act as an ‘inviolable’ support and this level may not come back into the picture for the next several months, if not longer (note that 6.8825 is also near a rising trend-line support)”.
“On the upside, after blasting past the round-number resistance of 7.0000 and 7.1000 last month, USD/CNY is currently approaching the next round-number of 7.2000. A clear break of 7.2000 would then shift the focus to 7.3000. Note that in view of the ‘one-way decline’ since 2005, there are hardly any significant resistance levels aside from these round-number resistance levels”.
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