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CNH Watched After Printing Fresh Cycle Low Amid Thin Liquidity

CHINA YUAN

Thursday's sharp sell-off in USD/CNH, driven by an uptick in e-minis coupled with holiday thinned liquidity, drew much attention to the pair, as it tested the water below Sep 16/cycle low of CNH6.7424, a key support level. USD/CNH bottomed out at CNH6.7306, the worst level since May 2019, but then edged away from there and returned above the aforementioned Sep 16 trough.

  • Tight liquidity conditions remain, with China still off for holidays. USD/CNH has been rangebound thus far and sits +15 pips at CNH6.7507 at typing. Sustained sales through Sep 16 low of CNH6.7424 & yesterday's low of CNH6.7306 would confirm the resumption of a broader downtrend, turning focus to the CNH6.67-68 area, which limited losses as the rate charted a triple bottom in 1H2019. On the topside, bulls need a move through Sep 24 high of CNH6.8462 to regain poise.
  • Markets in mainland China will be shut until Thursday, but an update on foreign reserves comes out on Wednesday, while Caixin Services & Composite PMIs are due Thursday.

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