News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • Further your trading knowledge and gain informed market analyses from our expert analyst @DavidJSong on Oil with our free Q4 guide, available for free today.https://t.co/Y6XECmr5fQ https://t.co/XQI3PN4bkQ
  • Nasdaq 100 may hit new high soon. https://t.co/ACtVqiOBl0
  • HSTECH index has likely formed an "Inverse Head & Shoulders" pattern. https://t.co/YFIQEYmuyq
  • The HSI has likely formed a “Double Bottom” chart pattern, which is usually viewed as bullish-biased. https://t.co/wMQ14A867Q
  • When markets are falling, how can you short sell? Learn more here:https://t.co/K4EFd6A6xd https://t.co/ynjtSQqHVy
  • Futures have their own set of characteristics and appeal to different types of traders and investors for a variety of reasons. Get your free trading guide and learn to trade the markets with futures here. Download your guide today!https://t.co/72oKM0kLHL https://t.co/dLBhWmxuub
  • Relative stability in EUR/USD has masked weakness in the Euro against most other major currencies, and that weakness can be expected to persist in the week ahead and likely for longer. Get your weekly Euro forecast from @MartinSEssex here: https://t.co/g6aCr7Uxg2 https://t.co/KZHBa4GXCN
  • Technical analysis of charts aims to identify patterns and market trends by utilizing differing forms of technical chart types and other chart functions. Learn about the top three technical analysis tools here: https://t.co/KDjIjLdTSk https://t.co/Z8oipLero0
  • Gold prices moved higher last week, but an upbeat US retail sales report underpinned Treasury yields on Friday, which weighed on bullion. Chinese Q3 GDP is in focus for XAU traders. Get your weekly gold forecast from @FxWestwater here: https://t.co/L9JstXgjx0 https://t.co/rCikjEv1Fm
  • Equity traders often focus their approach on specific sectors, designed to fit with their approach and style. What sector are you going to target? Read more to find out!https://t.co/5gbiHmY8yl https://t.co/dzRs61zPlt
USDCNH Long as US-China Discord Deepens: Q4 Top Trades

USDCNH Long as US-China Discord Deepens: Q4 Top Trades

John Kicklighter, Chief Strategist

USDCNH and Gold 4Q Opportunity Talking Points

  • USDCNH is not a ‘regular’ currency pair open to the ebb and flow of fundamental tides but rather a political tool which may find heavy use going forward
  • Despite the rise in cryptocurrency, Gold is still considered the principal anti-fiat which poses a risk for the metal as global monetary policy faces normalization

We are passing through a period of considerable upheaval in regards to expectations around growth, monetary policy and the financial system. Any number of surprises can result in a wholesale shift for the undercurrent of investor sentiment across the entire market – much less individual assets. That potential volatility is good for tactical trading but a definite encumbrance for positioning. As such, when I consider the landscape over the coming three months, I see many scenarios that can develop on fundamental and/or technical grounds; but frontrunning with an assumption for the outcome seems foolhardy. In short, I expect many trade opportunities to arise in the three-month stretch; however, there are not many prominent medium-term setups finding traction now at the turn of the quarter.

To track the source of opportunities heading into the fourth quarter of 2021, I take guidance from some of the biggest influences that can be registered. Setting aside direct ‘risk on / risk off’ options for tactical action within the period, I believe the global macro picture surrounding China makes for an interesting skew in the scenarios for USDCNH. There is interesting technical analysis to be extracted from the cross, but the pair does not follow the traditional patterns. Instead, it is more the product of political machinations. Through the end of the third quarter, beleaguered Chinese property developer Evergrande was headline news for its massive liabilities and default risks. More generally, its troubles reflect the debt boom in China and more systemic problems in the country’s opaque financial system.

Chart of USD/CNH (Weekly)

USDCNH Long as US-China Discord Deepens: Q4 Top Trades

Chart prepared by John Kicklighter, created with IG Platform

While the government will act to prevent contagion to its markets and economy, external pressure will still be felt. To help offset the domestic issues, a depreciation of its currency (rise in USDCNH) would offer relief through exports – a stratagem used frequently enough over the years. This time around though, a controlled rise in the exchange rate can have some grounding in diplomatic explanation as a natural reaction to China’s crackdown on its debt binge – and potentially even a reflection of ‘risk aversion’.

Chart of Gold Overlaid with Rate of Change in World Central Banks’ Balance Sheets (Daily)

USDCNH Long as US-China Discord Deepens: Q4 Top Trades

Chart prepared by John Kicklighter

Another general theme that will no doubt be the launch of many macro trades – and cause serious tumult for those not tracking this dimension – is the transition in global monetary policy taking place through the second half of 2021. While the Federal Reserve’s announcement on September 22nd that it was on course for a taper and that a rate hike was likely next year topped the headlines, it was just one more group steering away from the perpetually expanding stimulus efforts. While there were some major policy authorities not ready to tap the breaks (European Central Bank, Bank of Japan, Swiss National Bank), others have signaled an intent to tighten (Bank of England, Reserve Bank of Australia) and some even acted to taper or hike (Bank of Canada, Reserve Bank of New Zealand, Mexican Central Bank). There are plenty of ‘risk asset’ implications and relative regional considerations in this shift, but I like the systemic perspective for Gold. The precious metal is the traditional ‘anti-fiat’, and it tends to suffer when yields rise and financial assets recover. This is a lumbering development; but for levels, I think 1,675 is notable support.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES