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.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Mixed
USD/JPY
Bullish
Gold
Mixed
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • What is the status of the $USD as the world's reserve currency, and where is #Brexit heading? Find out from @IG_US CEO Rupert Osborne, only on Trading Global Markets Decoded #podcast episode here: https://t.co/wnEQUhB0v9 https://t.co/gtKf1wxlbM
  • (Analyst Pick) Australian Dollar Forecast Versus Yen, AUD/JPY Declines to Resume? $AUDJPY #AUD #JPY - https://www.dailyfx.com/forex/analyst_picks/todays_picks/daniel_dubrovsky/2019/10/15/Australian-Dollar-Forecast-Versus-Yen-AUDJPY-Declines-to-Resume.html?CHID=9&QPID=917702 https://t.co/wxpMKdZSxP
  • Japan Industrial Production (YoY) (AUG F): Actual: -4.7% Previous: -4.7% And Tertiary Industry Index (MoM) (AUG) Actual: 0.4% Previous: 0.1% $USDJPY
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 95.92%, while traders in France 40 are at opposite extremes with 83.41%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/wpiVMUxSmj
  • Forex Update: As of 04:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.07% 🇨🇭CHF: 0.06% 🇬🇧GBP: 0.06% 🇪🇺EUR: 0.05% 🇯🇵JPY: 0.04% 🇦🇺AUD: 0.00% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/4I9J8GjX73
  • Heads Up:🇯🇵 JPY Industrial Production (YoY) (AUG F) due at 04:30 GMT (15min), Actual: N/A Expected: N/A Previous: -4.7% https://www.dailyfx.com/economic-calendar#2019-10-15
  • Heads Up:🇯🇵 JPY Tertiary Industry Index (MoM) (AUG) due at 04:30 GMT (15min), Actual: N/A Expected: 0.6% Previous: 0.1% https://www.dailyfx.com/economic-calendar#2019-10-15
  • Heads up: Japan’s Industrial Production (YoY) (AUG F) Previous: -4.7% And Japan’s Tertiary Industry Index (MoM) (AUG) is due at 4:30 GMT (15 min) Est: 0.6% Previous: 0.1% #JPY
  • Indices Update: As of 04:00, these are your best and worst performers based on the London trading schedule: France 40: 0.25% US 500: 0.23% Wall Street: 0.22% Germany 30: 0.19% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/7JfhGLDevy
  • (Market Alert) US Dollar Outlook After USD/SGD Fell, MAS Eased Ahead of China GDP $USDSGD #MAS #USD - https://www.dailyfx.com/forex/market_alert/2019/10/15/US-Dollar-Outlook-After-USDSGD-Fell-MAS-Eased-Ahead-of-China-GDP.html?CHID=9&QPID=917702 https://t.co/JJRuFBDeLJ
USD/CNH Charts Show the Makings of a Top

USD/CNH Charts Show the Makings of a Top

2018-08-23 12:10:00
Paul Robinson, Currency Strategist
Share:

USD/CNH Trade Set-up

  • Sharp key-reversal on the weekly chart
  • Head-and-shoulders pattern forming
  • Using gold sentiment as a proxy

For trading forecasts and a library of educational content, check out the DailyFX Trading Guides

Larger reversal could soon be store for USDCNH

We began discussing USD/CNH last week as it reversed sharply from near long-term resistance just under 7. The key-reversal on the weekly time-frame was a powerful occurrence, one which on its own suggests lower prices could be in store in the relatively near future.

Furthering along the notion of lower prices was the breaking of the neat channeling sequence in place since early July. But what is making this set-up most compelling now is the possibility of a head-and-shoulders pattern forming with the weekly reversal bar as part of the overall sequence.

Check out the IG Client Sentiment to see how you can use this as a contrarian indicator in your analysis

USD/CNH Weekly Chart (Key-reversal)

USD/CNH weekly chart, key reversal

The H&S pattern is just a scenario at this juncture with only the left shoulder, head, and neckline showing. The right shoulder still needs to form, and of course to validate the pattern price needs to decline below the neckline.

On a turn down and break of the neckline, based on the height of the pattern, the measured move target is right around 6.69. However, there is room for a decline to the July low of 6.60.

USD/CNH 4-hr Chart (H&S Forming)

USD/CH 4-hr chart, head-and-shoulders forming

Adding weight to this idea is the extreme sentiment recently seen in gold, with one futures sentiment gauge (Daily Sentiment Index – DSI) dropping to only 6% bulls, Friday’s CoT report showing large trend-followers flip to net-short for the first time in 16 years. With the metal having a 1-month/3-month correlation of 63% and 97% to CNH, respectively, it seems safe to use extreme gold sentiment as a proxy for USD/CNH.

In total, the backdrop is set for USD/CNH to decline with a couple of technical signposts supported by extreme sentiment, but for total confirmation we’ll want to wait for the neckline of the H&S formation to break.

For a different perspective on the same idea, check out my colleague Tyler Yell’s recent piece on USD/CNH.

Resources for Forex & CFD Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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

DISCLOSURES

News & Analysis at your fingertips.