Yuan Walks Through The Valley in 2016

I posted this in September: PBoC: We Can Do This All Year; Bears: Let's
The Chinese idiom on the chart says "Manna from Heaven," referring to the PBOC intervention in the market.

The bears were happy for the lift:

The PBoC will intervene until it cannot or will not. These interventions will attract larger bear traders as depreciation expectations rise and interventions provide better entry points. Eventually, the PBoC will see reserves fall to a point that invites sudden heavy selling, or it will choose to protect the reserves and allow faster depreciation.

In the prior post on 牛刀's forecast, he picked 6.8 as the battle line. Why 6.8 you may ask? Let's go to the chart:
The 6.8 level is where the government froze the currency back during the 2008 crisis. A break below 6.8 will be interpreted as reflecting a situation worse than in 2008. Think of all the people who may have bought yuan from 2008 to 2015 expecting appreciation, and now potentially facing double-digit losses.

From the technical side, there's no resistance because the government controlled the appreciation from 8.28 to 6.8, so there are no resistance or support levels until it hits the old peg price of 8.28 to $1. A battle at 6.8 could produce a huge cup and handle formation (or a saucer bottom), which would signal a big bullish breakout for USDCNY. The number I have seen most around the bearish forecasters is 7, and that would probably be a brief psychological resistance point, but then it's smooth sailing upward. The PBoC could always short-circuit a depreciation wave with a big one-off devaluation, which strikes me as very plausible if control starts slipping away.

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