USD/CNY Vs CNY/JPY: Levels, Ranges, Targets

From the USD/CNY April 1 post, a re visit and brief history to Yuan internationalization since 2005.
USD/CNY trade history as a result of the 2005 internationalization of the Yuan began July 2005 at 8.0351 then dropped over 1200 pips 3 years later to 6.7922 in July 2008. From July 2008 to May 2010, USD/CNY traded in dormant stages inside a 795 pip range from 6.8895 to 6.8090.

USD/CNY’s 789 pip downtrend resumed from June 2010 to June 2014 from 6.8305 to a 9 year bottom at 6.0406. An uptrend began from 6.0406 to June 2017 highs at 6.9622. USD/CNY trades at current roughly 6.7788 April 1.

USD/CNY since 2005 and in 144 traded months, 99 down months were seen as opposed to 45 up months.

Politically, China was granted Most Favored Trade status by the 1st George Bush Administration in 1991 – 1992 which means zero to low low tariff charges for China Imports and Most Favored Nation Status resumes to current day.

USD/CNY when last visited April 1 traded at 6.2874 and the forecast was to trade 997 pips higher to 6.3268, 6.3779 and 6.3871. USD/CNY since broke 6.3871 to trade at current 6.7788 and trades above the 5 and 10 year averages at 6.4234 and 6.4972.
USD/CNY’s range from most significant break points is located from 6.5572 to 6.8085, a 2513 pip range as USD/CNY is an extremely wide ranging currency pair both on a short and long term basis.

USD/CNY rose 6000 more pips higher than the 997 pip forecast in April from 6.3871. The reason is China is a Repo rate nation as opposed to most G10 as interest rate nations, big difference.

Best manner to view USD/CNY ranges short term is from 700, 800 and 1000 pips and this represents just the start to longer term USD/CNY forecasts.

From current 6.7788, USD/CNY is deeply overbought into the stratosphere and must trade lower. The first target below is located at 6.7001 and 6.6797 then 6.6358 and 6.6121. For far lower, USD/CNY must break 6.5572 and 6.5429. Until both breaks then USD/CNY must view as a correction inside a larger uptrend.

CNY/JPY from current 16.6740 is deeply oversold and must trade higher yet trade higher is representative of a correction inside a larger downtrend. The current range is supported below at 16.6326 and 16.4993 Vs above breal points at 16.8509 and 16.8983. A break of 16.8983 the next targets 16.9678 and 17.0324. The break at 16.8983 to travel higher corresponds to USD/CNY 6.5572.

Targets above for higher begins at 16.6901 and 16.7642 for roughly a 902 pip corrective move. On a longer term, multi month term, CNY/JPY has potential to trade to 17.0580.

As was stated many times, Fed Funds was and remains in extreme overbought into all 2016 and overbought extremes means 20 and 25 year monthly averages. Yet the Fed never halted it raise path. Significant moves will be seen in currency prices especially in the USD/CNY and CNY/JPY relationship upon a Fed halt to raises. A 5 year median Dot Plot hardly reveals the true position to current Fed Funds.

 

Brian Twomey

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