Break Below Established Range In USD/CNH Develops Further, Nears Key Support

This week’s aggressive range break out develops further in USD/CNH, with the rate showing as low as 7.2098 in recent trade.

• Technically, bears eye uptrend support drawn off the Feb lows (CNH7.2086 today). This comes after the last few sessions provided a meaningful break below the 100-DMA. Below aforementioned trend line support there isn’t much in the way of meaningful levels to note until the August 4 low (7.1553).
• The recent range breaks in USD/CNH have allowed (still subdued) implied vol. to tick up from recent lows.
• The general trend of ongoing outflows from mainland equities via the HK-China Stock Connect links has done little to dent CNH this week.
• Meanwhile, continued/heightened support for the property sector (a focal point of recently released headlines out of Beijing in the wake of a meeting between the PBoC and financial regulators), as well as a seeming heightened awareness amongst policymaking spheres re: the need to support household consumption, will have factored into the CNH side of the equation.
• Broader USD weakness has of course played its part on the other side of the pair.