Chinese Yuan made a notable recovery today after PBoC made its intentions clear, vowing to staunchly prevent an “over-adjustment” in the Yuan’s exchange rate and avert systemic financial pitfalls. Amplifying this verbal intervention, several of China’s major state-owned banks have been observed actively selling US Dollars in favor of Yuan in both onshore and offshore markets this week.
This proactive stance by PBoC and state-owned banks arises at a time when Yuan has been on a downward trajectory, dangerously inching closer to its lowest levels since 2007.
Market observers are now grappling with a pivotal question: Is China’s move aimed at establishing a firm bottom for Yuan or merely an effort to slow down its rapid decline?
Technically, a temporary top should be formed at 7.3491 in USD/CNH and some consolidation is now expected. As long as 55 4H EMA holds (now at 7.2685), further rally is still in favor. Break of 7.3491 will resume the rally from 6.6971 towards 7.3745 high, or possibly further to 61.8% projection of 6.8100 to 7.2853 from 7.1154 at 7.4889.
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