USD/CNY completes a 38.2% Fibonacci retracement on Thursday with a low of 6.9559. This is the third day down for the pair after hitting a swing high of 7.0248 on Monday. So far, the pullback is relatively minor and not indicative of sustainable selling pressure coming into the market. Of course, we’ll have to see what happens next.
If USD/CNY falls below Thursday’s low, then the next key lower support area to watch is this week’s low at 6.9363 together with the 50% retracement at 6.9329. Then, the 61.8% Fibonacci level at 6.9096 is below there.
There are several reasons for a bullish assessment, some touched upon previously in this week’s analysis, and now broken out below:
- Breakout of large Cup with Handle base in August 2019.
- Breakout candle was a wide range and closed strong, at the high. Price continued higher from there with only minor pullbacks.
- Retracement off September 7.1842 peak was relatively organized and formed a parallel channel, showing some degree of symmetry.
- Most recent retracement found support around the 61.8% Fibonacci level and then reversed higher.
- Most recent retracement pulled back into the Cup with Handle formation but not too deep.
- Channel low is a higher low than the prior swing low thereby maintaining a series of higher swing highs and lows since the 2018 bottom.
Time Symmetry Between Corrections
There is another important piece of analysis that supports the likelihood that the 6.8409 channel low completes a correction. Each of the past two corrections show a degree of time symmetry as the number of trading days from high to low are an exact match.
Symmetry in either price or time between different swings shows a relationship in the underlying dynamics of a financial instrument. They do happen somewhat regularly, but it depends on the instrument.
The retracement that started off the 6.9856 swing high at the end of October 2018 reached a low after 20 weeks, and so did the recent retracement off the 7.1842 swing high from early-September 2019. In addition, the percentage decline during those two corrections were close, at 4.40% and 4.78%, respectively.
This article was originally posted on FX Empire
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