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USD CNH Technical Analysis - USD CNH Trading: 2018-08-03
Deteriorating Chinese economic data bullish for USDCNH
July manufacturing PMI for China reported by Caixin was lower than expected. Will the USDCNH climb continue?
The GDP report in mid-July indicated China’s economy slowed in the second quarter: the GDP grew at 6.7% annual rate in the second quarter of 2018 after a 6.8% growth in the first three months of the year. Two weeks later the National Bureau of Statistics of China reported the manufacturing PMI declined to 51.2 in July from 51.5 in June. The next day Caixin reported its manufacturing PMI for China slipped to 50.8 in July from 51 in June. Readings above 50 indicate expansion in sector’s activities. Caixin report showed China’s manufacturing sector grew at the slowest pace in eight months in July as export orders declined. Slowing economic growth is bullish for USDCNH.
On the daily timeframe USDCNH: D1 is above the 50-day moving average MA(50) and both are rising, this is bullish.
- The Parabolic indicator has formed a buy signal.
- The Donchian channel indicates uptrend: it is tilted up.
- The MACD indicator is above the signal line with the gap widening. This is a bullish signal.
- The stochastic oscillator has breached into the overbought zone, this is bearish.
We believe the bullish momentum will continue after the price breaches above the upper Donchian boundary at 6.8965. This level can be used as an entry point for placing a pending order to buy. The stop loss can be placed below the last fractal low at 6.7736. After placing the pending order the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop-loss level (6.7736) without reaching the order (6.8965) we recommend cancelling the order: the market sustains internal changes which were not taken into account.
Technical Analysis Summary
| Position | Buy |
| Buy Stop | Above 68965 |
| Stop loss | Below 6.7736 |
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