US Dollar Looks To Break Out Higher Against TWD

The USD/TWD pair isn’t one that I get involved with much, however the market is starting to look very interesting to me. After all, it isn’t every day that you see a breakout on the monthly chart.

The Taiwan dollar is essentially a proxy for the Chinese Yuan. As you know, that currency is almost impossible to trade, and is highly manipulated. It should be noted that on March 15, the People’s Bank of China doubled the trading band allowable for the Yuan against the US dollar. It has been soft against the greenback since.

The Central Bank of the Republic of China (Taiwan) entered the market on Tuesday, supporting the US dollar against the TWD, jumping in at the NT $30.3500 level. This market is now being supported by the CBRC, and in this fairly illiquid market, that will make a huge difference. Also, Chinese economic numbers haven’t exactly been knocking it out of the park lately.

With this in mind, I look at the attached monthly chart, and see that the 30.5000 level looks to be the top of an ascending triangle. This triangle looks likely to give way now, and when it does – there should be a technical move of 2.2000 to the upside, based upon the measurement. With this, I am looking for this pair to reach the 32.2000 level by the time the move is over. However, I need to see the pair close on a daily chart above the 30.5000 before actually placing that trade.

Keep in mind that the Chinese central banks will often prepare ahead of Federal Reserve announcements, and with the TWD being a small market, it makes sense for the locals to prepare for whatever statement we see coming from the Fed later today. However, from a technical side it appears that this market has just about made up its mind on where it wants to go. USD/TWD Monthly" title="USD/TWD Monthly" height="448" width="690">