RMB as a reserve currency?

In the past few months, we have seen China aggressively pursue currency swaps with many countries. The most recent being the deal with ECB to swap 350 billion yuan and €45 billion.

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Europe and China have agreed a currency swap deal to boost trade and investment between the regions.


Also, in recent years, China have also increase its consumption with the rise of the super rich in its populations. China have trade ties with many countries and payments in yuan have become more accepted. 

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The Chinese yuan was the ninth most traded currency in the world in the most recent ranking by the Bank for International Settlements, the first time the currency has broken into the top 10.

So my interest is if China is going to become a global reserve currency soon (when) and how that will affect the pricing of its currency pairs.

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China's Renminbi Is Well On Its Way To Becoming A Global Reserve Currency
Q&A: What’s a Currency Swap Line?

China has also taken steps to increase the ease of globalisation of its currency by setting up a Shanghai free trade zone which could move the country up the ranks of financial centers of the World without relying on Hong Kong.

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China launches free trade zone in Shanghai

On the Asian pacific region, we can no longer deny that China is already a "Big brother" in status. With many countries relying on China for growth.

The diagrams below show some trade information from http://www.intracen.org on China's trade statistics.

If China is not exporting its products, where does it go? To its own market maybe. High consumption 

As you can see lots of markets in the bottom left corner, exporting to China. With only the United States and Hong Kong importing more.

Also, in Asia Briefing we have an interesting article on the change in roles of China and Asean.

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HSBC infrastructure report: Asia will bloom

So what is the outlook of the RMB in the months to come? A look at the charts.

SGDCNY

As you can see, SGDCNY is moving in a descending channel and is currently trapped between the 21 SMA and the 200 SMA. the 21SMA and the 34 SMA has just recently crossed each other signalling a short term bullish move. Also in the smaller channel, we have channel and horizontal resistance right here at 4.90. 

Above 4.90, 5.00 is the longer term resistance. 

Ideally to get long the RMB between 4.90 and 5.00. However, if smaller time frame channel is respected, expect the RMB to strengthen further against the SGD.

EURCNY

Looks boxed between 8.50 to 8.00

CNY could be weakening short term. Wait for 8.50 before getting long RMB.