The USD has been far the weakest currency his year and after losing about 10% of its value especially against the Euro and other major currencies and by the look of things, it may be a time for a correction. Indeed, after weeks and months of negative economic data, the US economy seems to be steadying somehow. This comes two weeks after strong NFP reading and today’s Retail Sales sandwiched in between by last week’s inflation data which erased some of the USD gains. Today, data shows that Retail Sales surpassed expectation expanding by 0.5% with June’s reading revised higher. This represented a YoY gain of 4.3%, 0.7% higher than readings recorded in the previous year. Of note was that improvement in sales of construction/ building materials which were up by 8.3%. While this might be the perfect fodder for the greenback bulls, should caution be practiced? The issue of caution is relative depending on your trading style and of course how aggressive you are. Generally, from a technical perspective, the USD is deeply oversold and DXY in particular trending in multi year lows.
I will look to trade the USDCNH today partly because of the array of -expected and-good news from the US and secondly-and most importantly-from the confluence of technicals in the weekly and daily charts. Both the weekly and daily charts are turning from oversold territory with Monday’s candle closing well below the lower BB. This overextended price was confirmed yesterday and today as price continued to chart higher.
I will wait for a buy signal in the 1HR chart and look to go long while aiming for a 1:3 risk reward ratio. This will likely pan out as follows:
Buy Stop: above 6.7050
Stop Loss: 6.6810
Take Profit: 6.74-support turned resistance in the weekly chart.
Have a good trading day.