Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

USD/CNH: reversal in sight as US-China trade talks get back on track

Renewed hope over US-China trade talks brings a high likeliness of a bearish reversal for USD/CNH.

USD/CNH a barometer for trade talks

The outlook for US-China relations have been deteriorating over the course of recent months, with the decline in equities at the start of May coinciding with the breakdown in talks between the two sides. The importance of market sentiment over these negotiations should not be understated, for certain markets essentially act as the barometer for those talks.

USD/CNH is one such market, with the pair largely tracking the progress throughout 2018 and 2019. The daily chart below provides us with the journey, with the threats and ultimate implementation of tariffs through quarter two (Q2) and Q3 2018 bringing about a huge rally for the dollar at the expense of the Chinese yuan. With those talks stabilising through the latter part of the year, we saw a clear shift in tone through the end of 2018 and the beginning of 2019. Talk of very productive meetings heralded a new sense of optimism, with the end seemingly in sight for this breakdown in relations. However, with May 2019 bringing a breakdown in talks of further tariffs, it has come as no surprise that we have seen the pair move higher once more.

This week seems to mark a turning point once again, as comments from the US President Donald Trump put trade negotiations back on the table. Next week’s Group of 20 (G20) meeting was always going to be a hugely significant event, with Trump’s promise of further tariffs in the event of a Chinese no-show pointing towards a make or break moment.

However, the President of China Xi Jinping and Trump are now scheduled to embark on an extended meeting in Osaka. With the two sides back in negotiation ahead of that meeting, there is reason to believe we could see talks get back on track from here.

Charts starting to turn lower

A look back at the weekly chart above shows that the pair has been trading at a crucial area of resistance, with the pair remaining below the crucial 2017 high of ¥6.9874. Given the two reversals in 2017 and 2018, this recent rally looks like another potential reversal point if trade talks continue to make headway.

Double top formation signals potential reversal

The daily chart highlights the importance of the 27 May low of ¥6.8977, with USD/CNH turning higher from that area of support today.

The ability to break below that level will be crucial for the bearish story to gain traction, completing a double top formation in the process. As such, watch out for a break below that neckline to spark a wider bearish picture, with a continued progress in US-China trade negotiations providing greater confidence that we are seeing the beginning of another substantial sell-off for the pair.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Start trading forex today

Find opportunity on the world’s most-traded – and most-volatile – financial market.

  • Trade spreads from just 0.6 points on EUR/USD
  • Analyse with clear, fast charts
  • Speculate wherever you are with our intuitive mobile apps

See an FX opportunity?

Try a risk-free trade in your demo account, and see whether you’re onto something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See an FX opportunity?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from just 0.6 points on popular pairs
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See an FX opportunity?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.