BUZZ-COMMENT-Leap of faith for China bulls starts with a plunge
Oct 16 (Reuters) - Chinese yuan bulls had their faith tested early this week when the central bank amended its rule on FX forwards , but the ensuing fear of intentional currency devaluation has since abated , and USD/CNH now teeters at a point of technical reckoning.
Last month's break of the 200-week moving average was the first nail in the coffin. A Friday closing below 6.7162, the 50% retracement of the 2018-2020 rally which culminated in a double top, would bury USD/CNH in the medium term. That support would transform into a major resistance, and the resulting long-tailed doji candlestick would mark a failed rally - signalling the all-clear for USD sellers.
Those sitting on the fence should remember that China publishes third-quarter GDP data Monday. While every other major economy remains mired in a pandemic-driven contraction, the Reuters forecast is for a 5.2% year-on-year expansion after 3.2% growth in Q2. That makes a compelling case for increasing exposure to Chinese assets, as U.S. fund managers might attest .
To top it off, market positioning is not overly crowded yet , so there's still room for agnostics who may need a sanctuary whenthe U.S. presidential election storm hits.
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(Ewen Chew is a Reuters market analyst. The views expressed are his own.)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.