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USDCNH – Chinese (Offshore) Yuan at long term support levels!

Do not ignore this Chart! The Chinese Yuan can be considered a measure of risk for Asia/Emerging market economies and their currencies, thus making it an invaluable addition to any serious investor’s watchlist. After hitting a double top versus the USD at 7.20 in July last year, the Chinese Yuan has appreciated aggressively and has been a tailwind for emerging market currencies and bonds (local CCY denomination) as the reflation trade took shape.

However, we believe that the time has come for the Yuan to halt its appreciation vs the USD as it has hit long term support levels as shown below in the weekly chart of the Yuan. At the same time and as we have shown in a previous post (click here) the CEW ETF, which tracks a basket of emerging market currencies posted a key outside reversal at strong resistance last week, see chart below. The next few weeks will be telling for the next directional move in the emerging markets space. Stay tuned.

1. USDCNH – Weekly Chart: Has hit historical levels of support!

2. CEW ETF vs USD Index Weekly Chart: Key outside week at strong resistance!