When to get Contrarian?

January 13, 2016

When to get Contrarian?:
With the Chinese onshore RMB fix still the big Asian session focus, the fact that yesterday’s number came in 200 points below expectation was huge. Chinese authorities are flexing their muscles and showing they have very deep pockets in a bid to prove that the market is able to trade in both directions.

This was all about discouraging traders from shorting the offshore currency. By increasing borrowing costs to astronomical levels, the PBOC intends to squeeze out the shorts with this huge reversal that you can see on the following chart:

USD/CNH Daily:
Forex chart, USDCNH Daily, 160113
Click on chart to see a larger view.

Price has found some support at previously broken resistance… but on second thoughts, this probably isn’t the best time to be fading!

Moving onto OIL and the doom and gloom headlines from the major investment banks just keep on rolling through our screens! Morgan Stanley, Goldman, Deutsche et al all giving worst case scenarios well below current price.

The WTI OIL price traded with a $20 handle for the first time since 2003, with the CAD following its every move almost pip for pip.

OIL 15 Minute:
Commodities chart, OIL 15 Minute, 160113
Click on chart to see a larger view.

———-

Chart of the Day:
The Loonie continued its parabolic, upward trajectory as it reached its highest level since 2003.

USD/CAD Weekly:
Forex chart, USDCAD Weekly, 160113
Click on chart to see a larger view.

So with all this clear blue sky, where do we look for technical levels? Turn off auto-scroll on your MT4 platform and scroll back in time on the weekly chart.

Look at the zone that price happens to be sitting inside right now.

USD/CAD Daily:
Forex chart, USDCAD Daily, 160113
Click on chart to see a larger view.

But hey, as RBS says

“Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.”

Could you have gotten a bigger contrarian signal?

———

On the Calendar Wednesday:
CNY Trade Balance

USD Crude Oil Inventories

Do you see opportunity trading Forex? Take a look at the Vantage FX MT4 platform and instantly access your own free $50,000 demo trading account.

Dane Williams – @VantageFX

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