Logo

Posts

Yuan price forecast October 1 2020

2020-10-01

2020-10-01

Yuan spots the candidate. Forecast as of 01.10.2020Dmitri Demidenko

Which candidate, Joe Biden, or Donald Trump, in case of victory, will support the [USDCNH][1] sellers? Will the renminbi continue strengthening? I will cover these questions and offer the yearly trading plan for [USDCNH][1].

Fundamental yuan forecast for a year

The third quarter has been the best for the Chinese yuan since early 2008, it has been up by almost 4% versus the US dollar. The previous success series of the renminbi was in the 1970s and 1980s. They took place long before Beijing began liberalizing the foreign exchange market in 1994. The [USDCNH][1] bears are supported by the strong economy, payment balance, and high demand for Chinese assets. Under such conditions, the yuan bulls can be set back by the US presidential election.

Dynamics of the yuan

Source : Financial Time s

The fact that China was the first to face the pandemic and managed to cope with it better than others suggests the GDP growth in 2020. Furthermore, most global economies slipped down into the recession, and the divergence in the economic growth supports the [USDCNH][1] bears. The third quarter is indicative with this regard. The majority of financial analysts polled by the Wall Street Journal believe that the yuan rally will slow down as the world’s economies will be recovering. The forecasts of the 14 economists ranged from 6.5 to 7.7 yuan per dollar after 12 months.

The renminbi is also supported by the divergence in the monetary policies, China’s strong trade, and a potential increase in the capitals inflow in the Chinese securities market. Unlike the Fed, the People’s Bank of China is not willing to lower interest rates. As a result, the gap between 10-ear bond yields of the US and China has peaked close to the level of 2.4%. This fact, in addition to the yuan strengthening and the inclusion of China’s debt obligations in the structure of FTSE Russell indices, suggests an increase in capital inflows to the Asian markets. According to Morgan Stanley, annual purchases of China’s bonds by foreign investors through 2023 will be $80 billion-$120 billion, the stock purchases will be of $100 billion per year.

JP Morgan believes that the yuan strengthening results from the Chinese strong balance of payments. IN the second quarter, the current account surplus was $110 billion, and the inflow of portfolio investments will be $42 billion. Nowadays, the US trade deficit with China is the largest in the world. On the one hand, it is a bearish factor for the [USDCNH][1]. On the other hand, it raises concerns for yuan buyers.

Dynamics of US foreign trade

Source : Financial Times

In 2018-2019, the problems of Beijing and the yuan resulted from trade wars. Ahead of the US presidential election, Donald Trump will hardly resume trade wars, which support the [USDCNH][1] bears. In August, China even slowed down the purchases of the US product; it now should cover the gap of $110 billion before the end of 2020 to meet the trade agreement.

Chinese total imports from USA

Source : Bloomberg

[USDCNH][1] trading plan for a year

In my opinion, the idea to buy the yuan, which I outlined [earlier][2], is still relevant. The [USDCNH][1] target at 6.65 is getting closer. If Joe Biden wins the election, the pair can well reach 6.65 and 6.5 in the next six and twelve months. In the case of Donald Trump’s victory, the yuan rally should slow down. So, if Trump is reelected, I recommend exiting a part of shorts.

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker [here][3]. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Use my promo-code BLOG for getting deposit bonus 50% on LiteForex platform. Just enter this code in the appropriate field while [depositing][4] your trading account.
  • Telegram chat for traders: . We are sharing the signals and trading experience
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders

Price chart of USDCNH in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Rate this article:

{{value}}

( {{count}} {{title}} )

  1. my.liteforex.com/trading/chart?symbol=USDCNH&returnUrl=true
  2. www.liteforex.com/blog/analysts-opinions/yuan-is-strengthening-forecast-for-24092020/
  3. my.liteforex.com/?category=analysts-opinions&slug=yuan-spots-the-candidate-forecast-as-of-01102020&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  4. my.liteforex.com/deposit/?category=analysts-opinions&slug=yuan-spots-the-candidate-forecast-as-of-01102020&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus