Pressure on the Chinese yuan is a tailwind for the dollar

<p>This is one of the key charts to watch today as not only does it pertain to risk sentiment in general, it also has some bearing on the dollar's strength in the week ahead. Beijing have been trying to keep a lid on the currency's softening but the most they are doing now looks to be smoothening out the decline.</p><p>The drop in the yuan today is inadvertently dragging down the aussie and kiwi as well, with both currencies seen down 0.5% and 0.4% against the dollar respectively. But in general, it also could be a precursor for further dollar strength if we are to see USD/CNY shoot higher to levels last seen in November last year.</p><p>USD/JPY is already knocking on the door of 145.00 and EUR/USD is testing its 100-day moving average at 1.0929 on the day. Adding to that, we have AUD/USD which is breaking under 0.6500 and NZD/USD already falling below 0.6000 to its lowest levels since November last year.</p><p>It's all lining up now for the dollar and an indirect push higher from USD/CNY might be what the bulls need to find the next leg higher in the greenback. And this isn't the first time this year of this being such a case for the dollar.</p>

This article was written by Justin Low at www.forexlive.com.