CHN50 basket charts reversal pattern as US clamps down
Weekly Analysis
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FXCM's CHN50 basket may be charting a top, with a potential head and shoulders pattern. This pattern is a reversal pattern, suggesting a reversal to the downside. We are watching the neckline – a break below will signal the pattern's completion and will be bearish.
Momentum will play its part here. The weekly RSI is below 50 (green rectangle), which is the bearish side of the oscillator. The longer this position is maintained, the greater the likelihood that the head and shoulders top will be completed.
Last week's candle is especially bearish (blue arrow). Bulls tried to take price higher but lost control to bears at the weekly high. The bears pushed price down and the basket declined for the week.
Geopolitical Tensions
The topping pattern is charting despite positive economic data suggesting that China is recovering after three years of pressure. A major contributor is geopolitical risks.
The US is preparing further restrictions on China-related investments, with the Biden administration putting national security at the forefront of its China policy. A major focus and emphasis will be on emerging technologies that could potentially bolster China's military capability.
The forthcoming executive order may initially target corporate, private equity, and venture capital investments. This could lead to outbound restrictions broadening over time, with more export controls likely to follow. China will likely retaliate, possibly by targeting sectors where it has a competitive advantage, such as electric vehicle batteries, rare earths, and manufactured products like magnets.
As tensions escalate, the geopolitical cloud could spread beyond chips and Chinese stocks to a wider array of sectors, feeding into the anti-China sentiment building in Washington.
References
www.barrons.com
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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