Chart of The Day USDCNH

USDCNH Probable Price Path & Potential Reversal Zone

USD: The U.S. dollar slipped on Wednesday as Democrats took the lead in runoff votes that will determine control of the U.S. Senate and possibly pave the way for a big spending administration under President-elect Joe Biden. Analysts generally assume a Democrat-controlled Senate would be positive for economic growth globally and thus for most riskier assets, but negative for bonds and the dollar as the U.S. budget and trade deficits swell even further. A Democratic-led government is expected to add more stimulus to help mitigate the virus crisis and...that means that there's going to be a weaker dollar. The boost to the economy also makes investors more comfortable with risk and likely to seek assets outside the U.S., especially in emerging markets, Sandhu said. Democrats will control both houses of Congress if they win both Senate seats up for contest in Georgia

CNH: China's yuan softened on Wednesday, continuing its walk back from a strong rally early in the week, after the country's central bank appeared to signal a preference for a more moderate pace of appreciation. The CNH shot up 1% against the U.S. dollar on Monday, building on a near 7% rise in 2020, and looked set to add to gains on Tuesday before state banks were seen buying dollars in the onshore spot market to rein in the local currency's rally. On Tuesday evening, the People's Bank of China (PBOC) announced it would raise its macro prudential adjustment coefficient for domestic firms making overseas loans. China's week-long Spring Festival holiday to celebrate the Lunar New Year begins on Feb. 12. The CNH was boosted last year by a widening yield advantage in Chinese debt over other developed markets and the economy's rapid recovery from the COVID-19 pandemic, while the dollar has been hobbled by expectations the United States would announce more stimulus programmes. On Wednesday, a private sector survey showed China's services sector activity continued to expand in December, albeit at a slower pace amid sporadic coronavirus outbreaks

From a technical and trading perspective, the USDCNH printed a pivotal double top this year at the 7.2000 level and has since declined sharply throughout the second half of the year in unison with the broader USD Index. On the weekly chart price now looks poised to test a key inflection point between 6.40/43, this area represents the primary weekly trendline support and the 78.6% Fibonacci retracement of the 2018 - 2019 advance. Watch for bullish reversal patterns on the daily timeframe in this area to initiate long exposure targeting a move towards 6.67/6.70 UPDATE… the USDCNH has now traded into the potential reversal zone as discussed in the prior weekly time frame analysis. Moving to the daily time frame we can now see a clear five wave decline that completes with a an equality objective versus wave 1, watch for bullish daily reversal patterns to develop here which should encourage counter trend opportunities, setting the potential for a three wave corrective move to initially target 6.70 as highlighted in the chart below

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