FOREX: HIGHER PROBABILITY FOR USD/CNY TO FALL

In last week’s column we noted that although the last few days had been up, the market would likely go down again before rising further. That is exactly what has happened and the pattern at this time has even clarified somewhat.

There is a possibility that the market will rise a little higher, to either 6.850 or 6.860, but a rise above 6.8810 is not expected at this time.

After a brief rally or more sideways motion, the highest probability is that the market will drop below the January 2nd low of 6.8029 to 6.770 or even lower to test the October 24th low of 6.7480.


Daily USD/CNY chart as at 7 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

Stochastic – rising
NextView RSI – flat at it’s 50 level
Bollinger Bands – constricting – implying that a near term rise to R1 or R2 on the chart will be relatively overbought, and that a drop to S1 will be relatively oversold. Following the tightening of the bands around the consolidating market, I expect a break out to the downside.

R1 – resistance at 6.8500
R2 – 6.8650
S1 – 6.8029
S2- 6.770
S3 – 6.7480

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

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