The odds still favor an eventual bullish reversal for USD/CNY and resumption of the breakout of the falling trend channel that occurred on Monday.
USD/CNY completes a 38.2% Fibonacci retracement on Thursday with a low of 6.9559. This is the third day down for the pair after hitting a swing high of 7.0248 on Monday. So far, the pullback is relatively minor and not indicative of sustainable selling pressure coming into the market. Of course, we’ll have to see what happens next.
If USD/CNY falls below Thursday’s low, then the next key lower support area to watch is this week’s low at 6.9363 together with the 50% retracement at 6.9329. Then, the 61.8% Fibonacci level at 6.9096 is below there.
There are several reasons for a bullish assessment, some touched upon previously in this week’s analysis, and now broken out below:
There is another important piece of analysis that supports the likelihood that the 6.8409 channel low completes a correction. Each of the past two corrections show a degree of time symmetry as the number of trading days from high to low are an exact match.
Symmetry in either price or time between different swings shows a relationship in the underlying dynamics of a financial instrument. They do happen somewhat regularly, but it depends on the instrument.
The retracement that started off the 6.9856 swing high at the end of October 2018 reached a low after 20 weeks, and so did the recent retracement off the 7.1842 swing high from early-September 2019. In addition, the percentage decline during those two corrections were close, at 4.40% and 4.78%, respectively.
Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.