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Bullish Technical Setup Remains In Play For USD/CNH

CNH
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USD/CNH breached yesterday’s high (CNH7.2470) in Asia hours, extending the recent bullish move.

  • The move stalled ahead of CNH7.2500 (high CNH7.2495) before a pullback in the broader USD left the pair a little below CNH7.2450.
  • A fresh extension higher would target CNH7.2553, a Fibonacci retracement. Key resistance lies above there at the April 16 high (CNH7.2831).
  • On the other hand, a break of the May 16 low (CNH7.2042) would reinstate a bearish threat and open the way to key support at the May 3 low (CNH7.1653).
  • Local headline flow has focused on the need to boost consumer confidence and provide better protection for homebuyer rights in order to promote policy transmission.
  • Elsewhere, analysts have flagged scope for further falls in mortgage rates.
  • Finally, policymakers reiterated the need to control risks related to property, local debt and smaller banks. These risks are all well-documented.
  • Zooming out, the PBoC’s lean against runaway yuan weakness remains evident in the daily mid-point fixing, albeit off extremes (gauged against the BBG survey estimate for the mid-point fixing)
  • CNH funding is a little looser than it has been in recent history, with TN points comfortably back below 0.

Fig. 1: USD/CNH

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USD/CNH breached yesterday’s high (CNH7.2470) in Asia hours, extending the recent bullish move.

  • The move stalled ahead of CNH7.2500 (high CNH7.2495) before a pullback in the broader USD left the pair a little below CNH7.2450.
  • A fresh extension higher would target CNH7.2553, a Fibonacci retracement. Key resistance lies above there at the April 16 high (CNH7.2831).
  • On the other hand, a break of the May 16 low (CNH7.2042) would reinstate a bearish threat and open the way to key support at the May 3 low (CNH7.1653).
  • Local headline flow has focused on the need to boost consumer confidence and provide better protection for homebuyer rights in order to promote policy transmission.
  • Elsewhere, analysts have flagged scope for further falls in mortgage rates.
  • Finally, policymakers reiterated the need to control risks related to property, local debt and smaller banks. These risks are all well-documented.
  • Zooming out, the PBoC’s lean against runaway yuan weakness remains evident in the daily mid-point fixing, albeit off extremes (gauged against the BBG survey estimate for the mid-point fixing)
  • CNH funding is a little looser than it has been in recent history, with TN points comfortably back below 0.

Fig. 1: USD/CNH