Chart Of The Day: China's Yuan Nearing 3-Year Highs

Currency investors, made increasingly optimistic by yesterday's direct talks between US President Joseph Biden and China's President Xi Jinping, pushed the USD/CNY toward its highest levels since 2018.

Markets are hoping the first face-to-face summit—albeit virtually—between the leaders of the world's biggest economic superpowers will ease a host of existing tensions including those surrounding diplomatic and trade issues. Both Biden and Jinping spoke of the need for cooperation and talked about stabilizing their ties.

The yuan has been fluctuating this morning, trading at 6.3879 at time of writing. This price marks a rebound for the pair.

Tuesday's low for the yuan, 6.4610, was the lowest level for the Chinese currency since May 14, 2018, when the FX pair closed at 6.3594. This means that the Chinese renminbi is now at its strongest point since that time.

However, just another slight dip for the pair would bring it to its lowest since July 7, 2018, when the USD/CNY closed at 6.3907. That would mean the renminbi was at its strongest position in almost three and a half years.

From an intraday perspective, however, today's low found support by the May 31, 2021 6.3568 low.

USD/CNY Daily

Today's trading has created a most bullish hammer. That's signified by the fact that it has a very long, lower shadow and no upper shadow.

Which means bulls were able to repel the bearish attack and even gain more ground without the bears being able to push them back at all. This price action, however, is on an intraday basis. The candle requires the finality of a close to establish a hammer and provide a bullish call.

If this hammer is a precursor to a rebound for the pair, it has the technical potential to reach 6.5. Should it go higher still, it will have completed a double bottom.

Trading Strategies

Conservative traders should wait for the price to complete the double bottom and ensure an upward trend. Given that we're still in a downtrend, these types of traders should sit this out.

Moderate traders would wait for the price to retest today's lows before committing funds.

Aggressive traders could enter a long position, provided they accept the higher risk that goes with the higher rewards of beating the rest of the market. Money management is essential. Here is an example:

Trade Sample

• Entry: 6.3800
• Stop-Loss: 6.3700
• Risk: 100 pips
• Target: 6.4100
• Reward: 300 pips
• Risk:Reward Ratio: 1:3

Author's Note: Trading is not about knowing the future but rather about learning and understanding the relevant facts in order to form an educated opinion. Successful trading occurs when one learns how to get on the side of statistics and benefit accordingly. Therefore, developing a plan that fits one's budget, temperament and timing is critical. Use these samples to learn how to do this over time. If, however, you're expecting easy, fast money, trading isn't an appropriate vehicle.