close icon

USDCNH Before and After Trump’s Tariff Threat

The negotiations between the two biggest economies are not going as well as investors hoped. Stock market indices are down across the board following President Trump’s new China tariff threat. Another side-effect was the sharp rally to over 6.82 in USDCNH.

And while Trump’s tweet about China did, indeed, trigger the surge, the actual reason for it can be found elsewhere. The stage for a recovery in USDCNH was set over a month ago by an Elliott Wave pattern we discussed on March 22nd. Take a look at the chart below to refresh your memory.

Elliott Wave Forecast USDCNH

The pattern in question was a five-wave impulse, probably the best known pattern in the Elliott Wave catalog. Labeled 1-2-3-4-5, the sub-waves of wave 3 as well as those of wave (iii) of 3 were also clearly visible. According to the theory, a three-wave correction can be expected after every impulse.

In addition, there was a strong MACD bullish divergence between waves 3 and 5. So instead of joining the bears near 6.72 on March 22nd, we thought “traders can expect a three-wave recovery to lift USDCNH to at least 6.8000” in the near future. The updated chart below shows how the situation has been developing since.

USDCNH surges on fresh US-China trade fears

A month and a half later, USDCNH exceeded 6.82, drawing three waves up in the process. Predicting what President Trump or anyone else is going to say is practically impossible. Fortunately, it is also not necessary, especially if you have an eye for the patterns the market communicates through.

What Lies Ahead for USDCNH?

Now, there are two equally probable alternatives for USDCNH going forward. The good news is they are not very different from one another. The Elliott Wave principle states that once a correction is over, the larger trend resumes in the direction of the preceding impulse. Given that the five-wave sequence on the chart above points down, it makes sense to expect more weakness soon.

How soon depends on the final structure of the recovery from the bottom of wave 5 at 6.67. Right now, it looks like a complete W-X-Y double zigzag, but can also evolve into an A-B-C flat correction. Under the first scenario we can expect more weakness in USDCNH right away. The second one suggests the bulls can climb a little higher in wave C before giving up. Both don’t bode too well for the bulls ambitions from current levels.

Did you like this analysis? Similar Elliott Wave setups occur in the stock, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

USDCAD and the Anatomy of a Deceiving Correction

In late-September, 2021, USDCAD had already spent over two months in a narrowing sideways range. Despite occasionally breaching the 1.2900 mark during that time, the pair was unable to close a daily session above it. Neither was it able to significantly breach 1.2500. When it comes to narrowing range-bound movements, there is one Elliott Wave…

Read More »

GBPJPY Recovery Takes Shape of an Impulse Pattern

Less than two years ago, during the coronavirus market panic, GBPJPY fell to a multi-year low of 124.04. The last time the pair traded at such levels was in August, 2012, when the world was still recovering from the Financial Crisis. The Covid-19 selloff didn’t last that long though. After plunging 10.9% in March 2020…

Read More »

USDCAD Rises in Predictable Elliott Wave Manner

USDCAD rose significantly this past week, climbing from 1.2512 at the open to as high as 1.2949 Friday. The surge can be attributed to the slide in crude oil prices. Oil and USDCAD are known to have an inverse correlation due to the heavy reliance of the Canada’s economy on the commodity. And while the…

Read More »

Two Months Ahead of the 400-Pip Slide in EURUSD

Economic and fiscal steps taken to help the global economy rebound from the COVID-19 crisis are still in effect in both U.S. and EU. The amount of stimulus by the Fed far eclipsed the measures taken by the ECB. Direct unemployment payments are even creating a labor shortage. Many people prefer to rely on government…

Read More »

Elliott Wave Support Can Send USDZAR 15% Higher

It’s been a bad year for USDZAR bulls. The pair has been declining ever since it reached a high of 19.34 in early-April 2020. As of this writing, it is barely holding above 14.30, down 26% in a little over twelve months. Does this mean now is a good time to join the bears? We…

Read More »

Ahead of EURUSD ‘s Disappointing Start to 2021

Overall, 2020 was a good year for EURUSD bulls. Despite the March crash during the coronavirus-related volatility, the pair ended the year up almost 9%. With more stimulus already in the pipeline at the start of 2021, it made sense to expect further devaluation of the dollar against the Euro. Alas, common sense doesn’t always…

Read More »

USDJPY Gains 450 Pips and Counting in Two Months

2020 wasn’t a good year for USDJPY bulls. Starting from 108.63 in January, the pair closed at 103.32 on December 31st, down 4.9% in twelve months. But what the dollar lost against the yen in the entire 2020 it is now close to recouping in less than three months. USDJPY is approaching 108.50 as of…

Read More »

More analyses