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Onshore yuan weakness peaked in January, sooner than we expected and therefore ahead of our target, and also ahead of 6.623 – a 75 per cent retracement of moves since 2010.

Monday’s gap lower after the holiday is a reminder that exchange rate trends are most certainly not a one-way street or a dead certainty. Observed volatility soared to more than 6 per cent, which, while not high by international standards, is four standard deviations above the Chinese mean. People’s Bank of China governor Zhou Xiaochuan reminded everyone: “The trend is to rely further on the market to decide the level of the currency and to achieve a more flexible foreign exchange rate.” Plenty of chart support lies between 6.455 and 6.488.

Nicole Elliott is a technical analyst

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