- The US dollar has rallied rather significantly against the Chinese Yuan during the trading session here on Tuesday to slam into the 7.25 level.
- This is a pair that is a great measuring stick of risk appetite around the world with the Chinese Yuan benefiting from more risk on behavior.
- You can see clearly on the chart right now that it's more risk off.
The US dollar has been on fire since the elections. Furthermore, you have to keep in mind that US policy is going to change quite drastically, especially towards China. After all, the US election brought in a Republican House of Representatives, a Republican Senate, and of course Donald Trump as the Republican President.
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The Coming Trade War? Maybe.
With that being said, it could be quite dangerous for the Chinese economy. Whether or not that actually plays out, of course, is a completely different situation, but right now that's the perspective. Pullbacks at this point in time should continue to see plenty of support near the 7.2 level, and then again at the 7.15 level. It is worth noting that the 200-day EMA is right around the 7.1750 level and rising, so that could offer support as well, as it is a widely followed indicator by technical traders.
The market breaking above the 7.25 level and staying above there on a daily close does open up the possibility of a move to the 7.27 level and then eventually the 7.3 level. This uptrend has been very brutally strong, and I just don't see how it changes. In the short term, I think that pullbacks will almost certainly invite more buying, which you can actually extrapolate this beyond this currency pair say that about the US dollar in general right now. Quite frankly, the United States is pretty much the only game in town.
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