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CNH: USD/CNH Breaks Above 7.1500, Through 100-day EMA, Implied Vols Higher

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USD/CNH has finally broken above 7.1500, the pair hitting fresh highs of 7.1579 a little while ago. We are only 0.15% weaker for the session so far, in CNH terms, but the market bias has been to support dips in the pair so far today. Spot USD/CNY has also tracked to fresh multi month highs, last near 7.1400. 

  • For USD/CNH, highs in mid August around 7.1850 may present an upside target. Note before this we have the 200-day EMA near 7.1710. Today's break is a clear shift, if maintained, above the 100-day (near 7.1475).
  • In terms of catalysts, there doesn't appear to be an obvious one in terms of FX drivers. The tick lower in onshore equity indices is likely not helping, with the CSI 300 unable to move beyond the 4000 level. Some catch up with higher US-CH yield differentials may also be in play.
  • Proximity to the US election is another potential driver. The risk reversal space has got the 1 week and 2 week RR's close to flat and mostly trending higher, but the move is not sharp.
  • 2 week implied vol is surging, above 10.7% in latest dealings. The 1 month is up to 8.78%, levels last seen in early 2023. 
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USD/CNH has finally broken above 7.1500, the pair hitting fresh highs of 7.1579 a little while ago. We are only 0.15% weaker for the session so far, in CNH terms, but the market bias has been to support dips in the pair so far today. Spot USD/CNY has also tracked to fresh multi month highs, last near 7.1400. 

  • For USD/CNH, highs in mid August around 7.1850 may present an upside target. Note before this we have the 200-day EMA near 7.1710. Today's break is a clear shift, if maintained, above the 100-day (near 7.1475).
  • In terms of catalysts, there doesn't appear to be an obvious one in terms of FX drivers. The tick lower in onshore equity indices is likely not helping, with the CSI 300 unable to move beyond the 4000 level. Some catch up with higher US-CH yield differentials may also be in play.
  • Proximity to the US election is another potential driver. The risk reversal space has got the 1 week and 2 week RR's close to flat and mostly trending higher, but the move is not sharp.
  • 2 week implied vol is surging, above 10.7% in latest dealings. The 1 month is up to 8.78%, levels last seen in early 2023.