USD/CNY Makes Massive Spike After PBOC Formally Devalues Yuan
Simit Patel | Aug 11, 2015 07:59AM ET
The news of the day is certainly the devaluation of the yuan by the renminbi, which send USD/CNY soaring. The chart below illustrates.
The daily chart looks atypical, but some other perspectives may shed a different light. When we look at the monthly chart, we see that this doesn't really break any key technical patterns. If we can get to the top of the channel -- around 6.40 in the next few months -- it will be interesting to see if a reversal emerges.
The devaluation does signal that the PBOC will be engaging in currency wars and further confirms the notion that the Chinese economy is slowing down. This could suggest commodity prices will remain declined. For what it's worth, we did see gold and copper diverge yesterday, with gold rising and copper declining. I'm not sure if this suggests how prices for precious metals (gold) will differ from base metals (copper) if a slowdown and devaluation persist in China, but I thought it was worth noting.
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