Trade Recommendation: USD/CNY

The US Dollar/Chinese Yuan pair (USD/CNY) started its bull run in August 2015 when it took out resistance of 6.25. With a good base at 6.00, the pair climbed to as high as 6.9633 in December 2015. In four months, the pair grew by almost 12 percent.

At this point, the market was in overbought territory. Trend followers took the chance to dump positions and lock in their gains. The pair succumbed to increased selling activity as it snapped 6.83 support in May 2017. Since then, USD/CNY has been generating a series of lower highs and lower lows until recent price action.

Technical analysis reveal that the USD/CNY pair may have bottomed out in March 2018 when it went as low as 6.2419. Bulls quickly stepped in to lift the pair to as high as 6.3167 this month. In addition, a bullish divergence was spotted on the RSI of the weekly and daily charts. This is a good indication that reversal is on the horizon.

The strategy is to buy USD/CNY as close to 6.25 as possible. If bulls continue to defend the support, they will use it to create a solid base before climbing to our target of 6.85. The process may take more than six months.

Weekly Chart of USD/CNY

As of this writing, the USD/CNY pair is trading at 6.2808.

Summary of Strategy

Buy: As close to 6.25 as possible.

Target: 6.80

Stop: 6.24

 

Featured image courtesy of Shutterstock

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.