To The Moon

The recent adjustment of relevant news in China has helped related assets get out of a good market. One of the obvious ones is the RMB exchange rate. Driven by the simultaneous weakening of the US dollar index, the RMB returned to below the integer mark of 7 this morning. Does this mean a shift in trend? For the transaction, what substantial opportunities will it bring?

As we all know, the promotion of news plays a significant role in this round of trend, because we can see the relative strength by comparing the performance of other non-US currencies. If you look closely at the overall market of the US dollar, you will know that it is reasonable to repair the RMB. However, it may be too early to think that the trend has reversed.

First of all, in terms of the RMB itself, the rebound for several weeks has only brought the exchange rate back to a previous equilibrium position. At least push the price below 6.8 to have a chance to consider possible reversal. A more effective big shock market or dollar bear market signal needs to fall below 6.6. This process is likely to take 2-3 months, or even longer, while volatility remains at its current level.​​

​Secondly, from the perspective of the US dollar index, it is true that the decline continues. But this correction also means that it is getting closer and closer to the ideal opportunity to get on the bus again. Consistent with previous weeks, it is still more inclined that the US dollar is a wave of correction in the long-term market, rather than having peaked and started to reverse downward. While this logic seems to coincide with the prospect of interest rate hikes, we expect the main logic next year or the year after will be in other ways and in favor of the US dollar.

At present, the price of the US dollar index is only 1-2% away from the key support.In addition, the time period will reach 9 signals next week, and we expect the US dollar to fight back. If it is not bottoming out and reversing upward, it is at least a rebound that can be participated in.

​After combining the two factors,The current level of RMB trading opportunities may emerge. The simplest and most violent practice is naturally to buy or sell, but in fact, this practice is not very common in the foreign exchange market, especially in the RMB. People prefer arbitrage or other articles about exchange rate.

Take gold and silver, which are most familiar to everyone, as an example. There are trading varieties at home and abroad. Assuming that we expect the precious metal market to continue to rebound at present, when this variable is relatively limited, the valuation varieties with depreciation of exchange rate may rise more, while the valuation varieties with appreciation will rise slower. One more, the other is the choice.

A more complex and delicate approach is to observe the correlation and correlation between commodities and exchange rates themselves. The good news is that at present, the two are in the same direction, so there will be no extreme situation that if you make a mistake, you will make a big mistake and if you make a big profit. A relatively stable relationship means that it is easy to make a little money. Similarly, if precious metals are expected to pull back or go down, the valuation varieties with depreciation will fall slower and the valuation varieties with appreciation will fall more sharply.

It should be noted that there are still differences in leverage, trading time and other factors at home and abroad. Therefore, in the actual transaction, we should consider our own situation and trading environment.

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