Chart Of The Day: Ahead Of Trade Talks, Expect USD/CNY Triple-Bottom Reversal

 | May 01, 2019 10:01AM ET

Today’s Fed meeting, along with another round of promising trade talks between the world’s two largest economies, the U.S. and China, promise ample play for the world’s reserve currency. Another strong driver for the U.S. dollar is foreign demand for Treasurys, which are affected by the outlook for rates, as well as risk.

This, in turn, is influenced by the Fed’s accommodation. All of which is compounded by the fact that investors have been increasing Treasury holdings even as they have been driving stocks higher. There's a third analytical layer to this complex theme as well: one of the central issues of the trade dispute is China's currency — specifically whether the Asian country manipulates its yuan to gain unfair trade advantage over the U.S.

We've speculated in prior posts that China may be pulling the strings according to their trade negotiation tactics. But while we don’t know what those might be, nor could we know what the Fed will say, how it will say it, and how the market will react to it, or how investors would finally interpret it, by examining the technical charts and the patterns they suggest, we're hopeful of a dollar-Chinese yuan bottom.