China to Recovery After Battling COVID-19
- After 72 days of lockdown, Chinese government reopen “Wuhan”
- Since mid-March, the Yuan appreciated against the dollar, by pushing the USD/CNH more than 1.80% lower
- China will reopen before the United States in a race to lead the global economy
Monthly Time Frame:
Earlier this year, an invisible enemy emerged in China, that forced the country to shut down a central province, Hubei.
Since then, the dollar gained power over the Yuan by pushing the price from 6.84 to 7.16.
Before the lockdown, the USD/CNH was traded below the 7.19 mark to reach the lowest of 6.84 yuan versus each dollar.
At the beginning of March, the consequences of the lockdown appeared in China’s economy. It slowed down dramatically with Wuhan considered an important industrial city.
“The People’s Currency” started to fall, giving the greenback a chance to push upward towards the previous high 7.14 yuan to the US dollar.
As shown on the chart, on a monthly time frame, the currency edged by two lines that form an ascending triangle. Generally, this type of triangle indicates exhaustion of the price.
For USD/CNH to go downward, the pair must surpass the first test and break the uptrend (white). A considerable divergence is visible between the price and RSI values which signal a potential reversal.
Now to the 4-Hr time frame.
4-Hr Time Frame:
The 4hr is showing a close up on what might happen in the short-term with USD vs CNH.
A purple downtrend is blocking the price to rise upward, acting as a resistance. If it manages to break the first test, there will be another strong resistance, the red monthly one.
If it fails to pass the blue downtrend, the price most probably will bounce and start a downward movement, and we will see the Yuan appreciating against the dollar.
China was the first country that was hit economically from the pandemic since COVID-19 appeared.
Enforcing a full lockdown of the province where Wuhan resides, China managed to contain the virus relatively well, and flatten the curve after 72 days.
On Wednesday, the US government warned China it was knowingly responsible for the COVID-19 pandemic.