Hey friends hope you are well and welcome to the new update from the forex market. The Chinese Yuan has completed the bullish setup and ready to move up against US Dollar. In today's article we will watch the different chart patterns and indicators that are giving signals for the bullish movement of an Chinese Yuan.
A big falling wedge:
On long term monthly chart the Chinese Yuan is moving in a falling wedg. And this is considered as a bullish reversal pattern among the traders community. As this is the long term monthly chart and signals and patterns are more firmed on long term charts, therefore there are more chances that it will follow the bullish reversal behavior of falling wedge. At this time the price line of Yuan is at the resistance of wedge. But this time it will be difficult for the priceline to drop up to the support of this wedge. Later this article you will see that strong reasons why the Chinese Yuan will not reach at the support.
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Down channel and synchronized movement with indicators and EMAs:
On weekly chart the priceline can be seen moving within a down channel and the movement within this channel is very much synchronized with the stochastic and Momentum indicators. If you take a closer look at the chart then you will notice that whenever the price line reaches and the support and the stochastic gives bull cross and momentum starts turning bullish then price action takes bullish divergence and reaches up to the resistance of the channel. But this time the priceline of Yuan is almost at the center of the channel and Stochastic has entered in over sold zone and has given bull cross. And the momentum indicator is also changed from strong bearish to weak bearish. Therefore there are more chances that the price action will not move more down to reach the support of the channel. And if the Chinese Yuan will be moved up from here then the exponential moving average 10 can also cross up EMA 21 and this bull cross between the two exponential moving averages can lift the price action more up that can lead to the breakout from this channel.
A double bottom formation is cancelling the bearish move of Head & Shoulder:
On the weekly chart the price action has formed a Head and Shoulder pattern.The formation of this pattern was started from the September 2019. Now the priceline has crossed down the neckline of the shoulder and reached at $0.1395 support. Now the price action is likely to form a double bottom formation that can cancel the bearish rally that was started due to this H & S pattern.
A harmonic BAT formation:
On the same weekly chart the price action of Chinese Yuan has completed the formation of bullish BAT and entered in the potential reversal zone. Now we have seen that the different indicators on the weekly chart has given bullish signals and after formation of Head and Shoulder the priceline is likely to form a double bottom for bullish reversal and finally the price action has also formed a harmonic BAT pattern. And at this time it is in PRZ level. Therefore All indicators and patterns are giving strong signal that Chinese Yuan has completed the setup for bullish reversal. And it can start the bullish rally at any time.
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Conclusion:
On the long term signals and patterns are in favor of bulls rather in favor of bears, however the stop loss is must. In this trade we can set the maximum extent of the potential reversal zone as our stop loss.