FOREX: USD/CNY - Indicators are Pointing Down

The market did not move at all towards the high of the recent range during the past week. As to the downside, the market is still contained by the low of the range (S1 on the chart), as I suggested would be the case, in last week’s column.

For this week, a break below S1 will then target the October 24th low of 6.7480. Although the market appears to be threatening to go lower almost immediately, we must consider the possibility of an upside move first, probably to be followed by a down move.

Most technical indicators are pointing down and, while an eventual down move seems inevitable, the pattern at this moment doesn’t seem quite right. I see two possibilities:

1) a double bottom occurring before S1 is broken, the resulting rally to target the area between 6.8500-6.8600.

2) A minor penetration of S1, probably not exceeding 6.7900, to be followed by a test of 6.8360 and possibly 6.8480.


USD/CNY chart as at 31 December 2008 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS
R1 – 6.8482
R2 – 6.8810
S1- 6.8045
S2 – 6.7480

MACD – dropping from positive to negative territory
Bollinger bands – the lower band is providing potential support in the area of S1.

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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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