USD/CNY Prediction as Renminbi Slump EasesSeptember 12, 2022
- The USD/CNY exchange rate has seen a massive bullish bias.
- The crashing yuan saw it rising by nearly 10% in 2022.
- The Fed – PBOC divergence has widened.
The USD-CNY exchange rate has witnessed a massive bullish trend in 2022, pushing the renminbi and the Chinese yuan to the lowest zones since August 2020. USD/CNY has gained approximately 10% since this year began. That means the renminbi is traversing the path to the worst performance since China alleviated its currency tie.
Renminbi Crash Intensifies
Due to multiple factors, USD/CNY has seen massive bullish prices over the last few months. First and foremost, the pair surged because of the monetary policy divergence between China and the United States.
The United States Fed has adopted a more hawkish stance over the last few months. The central bank has hiked interest rates by 225bp. Moreover, it resorted to a plan to lessen USD circulation via the QT (quantitative tightening) policy.
Meantime, the PBOC (People’s Bank of China) maintained a different tone. The bank has executed multiple rate cuts, citing strategies to cushion the sputtering economy.
The country’s economy has deteriorated as the housing sector took a blow following the failure of several property companies. Moreover, the government remains an outlier in COVID policy. It has resorted to massive lockdowns in leading cities.
Secondly, USD-CNY has slumped as the United States dollar strengthened. The dollar index gained over 20% from its 2021 lowest mark. Meanwhile, the greenback surged as the US producer and consumer inflation climbed to four-decade highs.
The USD-CNY exchange rate noted a brief plunge within the last few days, following PBOC’s efforts to catalyze the currency’s crash. The central bank set the renminbi trading midpoint at the lowest mark in 2 years.
The 24hr chart shows USD-CNY price maintained a bullish bias within the last few weeks. The pair surged towards the 6.97 peaks the previous week from the 6.9240 low. Meantime, USD/CNY moved past the 25 and 50-day MAs.
The AO (Awesome Oscillator) moved past the neutral mark. Also, it recorded a move above the crucial support of 6.8133, 13 May’s highest level. Therefore, USD/CNY might keep surging, targeting the substantial resistance at 7.0. A dip beneath the 6.90 support will cancel the bullish tale.