Another USD break-down ahead

Is there another major USD down move on the way?

The clearest and most important level across FX markets is the year’s low on USDCNH at 6.8457. That level marks the double top neckline – USDCNH traded twice at exactly 7.1965 in September 2019 and May 2020 and 6.8457 was the interim low and pivot we are about to test.

This level will likely give way for a move down to the 6.67 area and then 6.50 in the long run.

However, in the middle of this “currency war”, it still does not look like China will be the loser but instead, from this perspective, more likely Europe.

EURCNY has effectively retested the earlier break level at 8.1060 which was the high from September 2018. That area should hold as support. Additionally, the price action since the 31 July high looks corrective in nature indicating that the next major directional move will be up.

If the above is correct, then expect a major rally on EURUSD through the long-term resistance levels just below 1.21. Beyond there we would be looking at the 1.25 handle which is approximately 5% away. Such a move would imply the DXY Index at, or just below, the long-term levels of 88

Note also that a break in XAUUSD is also about to take place. We are once again trading at the Jackson Hole high if $1,976. Watch for that to give way and then watch $2,016 as a break through there would likely open the way for new all time highs.

Charts below

SKA