Quantitative Analysis / China

Chinese yuan breaks 3-year high against the dollar

  • The yuan has strengthened by +10.7% in the past 12 months and 2.2% ytd
  • Our machine-learning model forecasts more appreciation, retracing the broad depreciation of the past decade
  • The current rally is the strongest since 2008, making it difficult for traders to ignore
Chinese yuan breaks 3-year high against the dollar

CNY/USD support and resistance levels

Machine-learning forecast

The current price of the Chinese yuan (CNY) in US dollars is 0.1565. Our machine-learning model forecasts a move to 0.1612 – an appreciation of +3.0% – over the next 12 months; but the path taken to get there will not be linear. The model first projects a break above the five-year high of 0.1602 within the next few months, followed by a move back down to 0.1525, before finally rallying towards 0.1612.

Downwards channel, but stronger than ever

CNY/USD has been trading inside a broad downwards channel (depicted on the chart below) for the past decade; however, there are clear signs of a shift in momentum.

1-year rolling performance

The current 1-year rolling return of +10.7% is the highest seen since 2008.

CNY/USD rolling 12-month return

Number of consecutive positive months

Last year’s rally to the top of the channel saw eight consecutive months of positive trading, the highest recorded since 2008. CNY has also increased its ability to string together consecutive positive months throughout the past 10 years – highlighting the growing bullishness.

CNY/USD consecutuve up months

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Disclosures

This report is independent investment research as contemplated by COBS 12.2 of the FCA Handbook and is a research recommendation under COBS 12.4 of the FCA Handbook. Where it is not technically a res...

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