Back in June this year, we called on our readers to go short on the Chinese yuan against the USD as the trade tensions started heating up between the U.S. and China, https://www.econotimes.com/FxWirePro-Short-term-Outlook-Buy-USD-CNH-targeting-654-1376249
and in mid-July, we followed up by calling to short the yuan again at the then current rate of 6.75 targeting 6.86 per USD and 7 per USD, https://www.econotimes.com/FxWirePro-Long-dollar-against-Chinese-yuan-targeting-686-and-beyond-1404999
We suggested that facing a showdown with the ‘Impossible Trinity’, China can do little to prevent the yuan from depreciating against the USD, https://www.econotimes.com/Renminbi-Series-China-weaponizing-yuan-theory-may-not-be-right-1406078 ; hence, in our next review, we extended our bearish target for the yuan from 7 per dollar to 7.4 per dollar.
The yuan is currently trading at 6.84 per USD, and our latest calculations suggest that the yuan might strength to as high as 6.6 per USD, before next leg down begins. Anyone interested in going short should maintain the stop loss around the recent bottom of 6.96 per USD.
Our calculations also suggest that yuan’s strength is likely to come from a weakness in the USD, whose valuations is looking stretched in the short-term. We also expect President Trump to maintain his rhetoric towards the USD, which should weaken the currency too. His rhetoric towards U.S. Federal Reserve should also act as a bearish factor.
