Biden’s victory will drive yuan up

Biden’s victory will drive yuan up

2020-10-22 • Updated

The US-Chinese relationship has been tense amid Trump’s governance, but if Biden wins, the situation may change. Let’s find out what it means for the Chinese yuan.

What happened?

The presidential candidate Joe Biden claimed that current tariffs for Chinese goods are too high and need to be decreased as they create drawbacks not only for the Chinese side, but also for American companies and consumers that are forced to overpay.

However, everybody understands that Biden won’t impose lower tariffs immediately after his victory. Of course, it will take some time, but if he wins, it will reduce the market uncertainty. Investors will be confident in his further rational actions over the Chinese trade agreement.

Forecast

The Lombard Odier analysts forecast that USD/CNH will reach 6.50, while currently it trades at the 6.70 level. It’s quite possible as the CNH has been already declining since May.

Technical tips

USD/CNH has been trading in a descending channel for over 5 months. Today the pair bounced off the lower trend line and took a breath after falling for so long. The upcoming presidential debate and impetus in fiscal stimulus deteriorated the market sentiment and underpinned the safe-haven USD. The most possible scenario is that the pair will rise to the resistance zone near 6.7500, where it will reverse and then start falling again, sticking to its long-term bearish trend. Support levels are 6.6250 and 6.6000.

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