China has broken its unwritten guarantee that the PBOC will maintain the Yuan below 7 to the US Dollar. Official fixings for USDCNY crept above 7.0 this week, indicating the PBOC is no longer prepared to support its currency.
This is a two-edged sword. While it makes exports cheaper, counteracting the effect of US tariffs, it makes imports more expensive, spiking inflation. It is also likely to spark capital flight, as evidenced by the sharp spike in Gold.
Spot Gold broke resistance at $1450, surging to $1500/ounce. A narrow consolidation at $1500 is likely, signaling further gains. The Trend Index trough above zero indicates strong buying pressure.
The next major resistance level is the 2012 high of $1800/ounce.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.