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Tuesday 5 September 2017

USDCNY/ SGDCNY Chart Analysis

China had made good promise on the widespread reforms in financial markets being undertaken would help the China yuan become an international currency by 2020. The slew of financial market reforms has bear fruits for China and its people. 

There are new developments surrounding China Yuan/Renminbi which it had been making headlines recently. 
  
There is a special relationship between the US dollar and the China Yuan where Yuan is pegged to US dollar. with the new developments will we see the yuan unpeg to US dollar in the near future. 
With these new developments: 
  1. The rise of Yuan/Renminbi replacing Petrodollar currency where commodities Crude Oil is priced in USD will be coming to an end. Now it had been conferred as Petroyuan currency. 
  2. Chinese A share is absorbing into MSCI Emerging Market Index allows foreign Institutional funds house to 
  3. The International Monetary Fund had included the Chinese yuan in the Fund's reserve currency basket, alongside the U.S. dollar, the euro, the British pound and the Japanese yen in October 2016. 

1.1. It offers crude oil producer an alternative to hedge their foreign reserves not necessarily be in US dollar but in Yuan, can choose to sell crude oil to China overtaking US as the leading importer of crude oil. 
1.2. We will see influx of smart monies namely foreign institutional funds flow into Chinese economy seeking alpha yields. 
1.3. China Yuan will become a major currency pair trading with the inclusion of yuan into IMF's   Special Drawing Rights (SDR) basket of currencies, widely used in international trade settlements, establishing itself on the world stage as economic and financial superpower. 

Yuan/Renminbi will strengthen over time attracting global talents to China with its appreciating currency. Theoretically a strengthening currency will see fund inflows.

Market participants cannot ignore the fact excluding china in their portfolios be it in the equities, properties, bonds, commodities or currency various assets class. A wise market participant will tap or seize on any opportunity to grow their portfolios. There is a saying that one equips themselves with the knowledge the art of fishing, will know how and where to fish or rather be spoon fed with fishes. 

Over the longer term horizon, foreign institutional funds are flowing into Chinese economy, the volume could push assets class into the highs especially into assets class of equities, properties, bonds, commodities and currency (yuan/renminbi). 

Amidst over the longer-term outlook of appreciating assets value of various assets class, there would be boom and bust, therefore we must understand how to determine overbought/oversold range by applying Asian investment guru master Hu Liyang's half theory which I had been applying his theory and it had shown amazing results. 

In one of his books, he wrote on a particular topic of how foreign institutional hot money inflows is determine by 4 highs and 1 low with a global investment framework theme like equating to "BRICs", "VISTA" and "Frontier" markets. example of "BRICs" stands for Brazil, Russia, India, China and South Africa. 

The 4 highs 1 lows are; 

Highs: 
1) High GDP growth 
2) High domestic demand growth 
3) High currency appreciation (yuan/renminbi) gain 
4) High investment securities gain 
Low: 
1) Low consumer price index (CPI) 

The above USDCNY charts displays a big rounding top chart formation with downside target of 6.00.




Base on technical analysis on SGDCNY pair, it is observe that bulls and bears are tussling with each other, bear  camp have won coincide with yuan newfound safe haven status, there are a few chart patterns displays blue color line refers to falling wedge chart pattern and price is resisted at black color classical support neckline, couple with green color inverted head and shoulder chart pattern somehow price resisted at 5.00 again by black color classical support neckline. it had formed double top chart pattern drawn in yellow lines. with a downside target of 4.40.





Base on Technical Analysis (TA) on Shanghai Stock Exchange Index charting, it displays a double bottom chart formation in green line and a price channel using black lines as a reference, where its resistance turn support to form new uptrend. 

Expectations of challenging recent June 2015 high of 5178 points is valid and subsequently all-time high of 6124 points in October 2007 supported by the fund flow analysis is in a bullish mode. 






Disclaimer: All news, information and charts shared is purely by my research and personal views only. This is not a trading recommendation or advice but on the basis of sharing information and educating the investment community. Different traders and investors adopt different trading strategies and risk management approach hence if in doubt please approach or seek clarifications with your Financial Adviser, Broker and Banker.

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