The move to yuan strength against the US dollar that has dominated this year accelerated violently in the middle of August with record bearish momentum, so that the greenback became more oversold than it has been in four years. Friday’s strong hammer against trend-line support taken from the low in January 2014 occurred at the 50 per cent retracement area of the controlled rally between then and December 2016. We feel that this combination of technical factors marks the end to this year’s move and a rally should undo the excess of the past fortnight. In fact, we would favour much to-ing and fro-ing at roughly between 6.45 and 6.60. Keep an eye out for other foreign exchange moves against the US dollar though.
Nicole Elliott is a technical analyst