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Aided By Broader USD Weakness, USD/CNH Still Above 200-day EMA

CNH

USD/CNH tracks near 7.2180 in early Thursday dealings. CNH gained 0.30% in Wednesday trade, as USD sentiment faltered. CNH underperformed the broader sell off with the BBDYX down 0.62%, but this has been the norm in terms of the CNH's lower beta with respect to USD moves in recent months. USD/CNY finished up at 7.2190, 0.20% stronger in yuan terms.

  • USD/CNH got near 7.2050 in post Asia trade on Wednesday before rebounding towards 7.2300 (before turning back lower). Volatility was evident through the US data outcomes, but ultimately the USD stayed softer amid a 9-11bps pull back in US Tsy yields. CPI was close to expectations, but retail sales missed, raising Fed easing hopes.
  • Shifting Fed easing expectations remains the dominant driver of US-CH rate differentials. China government bond yields remain fairly close to recent lows, as easing expectations/further liquidity support offset fresh long term bond issuance plans.
  • For USD/CNH, downside focus may rest at the 200-day EMA (near 7.2010), while the 100-day is around 7.2250 on the topside. The local data calendar is empty until tomorrow's house price data for April, along with activity figures, including IP and retail sales.
  • Details around further housing support plans could also be in focus, after yesterday's Bloomberg report of potential local government purchases of unsold housing stock aided risk appetite. It wasn't enough to drive a broader equity bounce though. The CSI 300 fell 0.85%.
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