The past two years have seen the biggest swings in oil prices in 14 years, which have baffled markets, investors, and traders due to geopolitical tensions and the shift towards clean energy.
USD/CNH: back to 2019
2020-10-01 • Updated
The risk-on sentiment started this week has moved potentially risky investments, such as emergency market currencies, the AUD, the NZD, and the CNH, higher against the American safe-haven – the US dollar. Currently, the Chinese yuan is focusing on the levels of spring 2019. Should we expect further lows or it is just the short-term recovery of the Chinese currency? Let’s hear the analysts’ opinions.
Stimulus talks and election
October is forecast to add volatility to the US dollar for two main reasons. Firstly, the United States enters the pre-election stage. The recent debate between the Democratic candidate Joe Biden and the Republican Donald Trump signaled a possible further escalation of tensions between the candidates ahead of November 3. Thus, we need to be prepared for more unexpected announcements and possibly compromising information. More analysis of the connections between the US election and the USD is presented in the article “TRUMP, ELECTION, USD: Cleveland debate”.
Another thing that is driving the USD crazy is the anticipation of an additional coronavirus stimulus package. According to the US Treasury Secretary Steven Mnuchin, he and the House Speaker Nancy Pelosi made progress in stimulus talks last week. Despite that, the House of Representatives voted for a delay of a stimulus bill yesterday in order to give more time to Mr. Mnuchin and Ms. Pelosi for discussions. For now, the Democrats persuade the Republicans to agree on the $2.2 trillion stimulus package. This is $1 trillion more expensive than the proposal by the Republicans. The next vote in the House of Representatives is scheduled for today. As a result, nothing is certain. If the policymakers fail to reach an agreement on support measures, the risk aversion will strengthen the USD.
Forecasts and technical outlook for USD/CNH
On October 1, USD/CNH has broken below the low of September 16 at 6.75 and started to go down towards the 6.7 level. If the USD gets positive momentum today, the pair will return above 6.75 level to the resistance at 6.8350. This scenario will go in line with the forecast by UOB Group, which expects consolidation between 6.75 and 6.8350 for the next 1-3 weeks. Alternatively, an agreement on stimulus may pull the pair to the low of April 2019 at 6.7. The breakout of that level will trigger further selling pressure towards the next strong obstacle at 6.6755.
After months of pressure from the White House, Saudi Arabia relented and agreed with other OPEC+ members to increase production.
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For those who may be unfamiliar with Price Action trading, the horizontal arrows represent areas where the market structure was broken. As you can see in the scenario above, price broke below the previous low at the two marked instances
Let's start off with a look at the Daily timeframe on Bitcoin. We currently see price reacting to the rally-base-rally demand zone between the 15,600 - 14,300 price area. Price also seems to have found support off the trendline support as marked in the image above. Interestingly, this means the overall bias on BTCUSD is Bullish.
Central Bank Digital Currencies (CBDCs) are virtual national money. The idea of creating such currencies came to the authorities after the success of cryptocurrencies, which also exist only in digital form.