At the request of a subscriber we will be tracking the USD/CNH relationship (which I can easily do now that I’ve subscribed to TradingView). The relationship between the US and Chinese currencies appears to be at or near the center of the global macro.
The correlation between the Chinese Yuan and gold got a lot of airplay last year as they declined in unison to lead and then recover first from the Q4 market anxiety that finally hit the US. CNH/USD has been a less volatile traveling companion to gold.
More recently, CNH/USD has gone in line with the global market rally and in particular China’s (FXI) out performance and consolidation in relation to the S&P 500 in Q1 2019. It appears that the correction in gold is simply closing the gap between it and its running mate (the gap was driven by the Q4 anxiety AKA a ‘fear trade’).
Now CNH/USD is consolidating right at the 50 day average which should hold for a continued positive global macro view, at least if recent correlations are to hold. Gold targets lower prices in the near-term to its SMA 200 (at least, in my opinion). If CNH/USD were to drop to its SMA 200 things could get uncomfortable globally, at least insofar as gold might lead CNH/USD to a test of the SMA 200. As it stands now however, CNH/USD is intact.
Click chart for full, clear view.
