Forex: USD/CNY bias to the Downside

Apart from a gap up on January 3rd, which closed sharply down with a low near the previous days’ narrow range, the USD/CNY moved very little last week. Neither S1 or R1 were challenged by price movement.

Bollinger Bands is on the chart again to demonstrate how the bands continue to narrow. This often precedes a significant break out in one direction or the other.

The indicator in the lowest window of the chart is called Bollinger Band width, and measures the degree of separation between the bands. When the bands narrow, the Bollinger Bands width indicator drops. It’s now near the level around which strong moves have typically occurred in the past.

An upward move is not out of the question but bias is to the downside.


Daily USD/CNY chart as at 29 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

Stochastic – dropping from its’ overbought level.
Bollinger Bands – constricting.
Bollinger Bands width – very low
EMA20 – flat, just below the market
R1 – resistance at 6.8500
S1 – support at 6.8045

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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.