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CNY in Focus as Spot Tests Trading Band for Second Session

FOREX
  • JPY is among the poorest performers in G10 headed into the NY crossover. This keeps USD/JPY well within range of the cycle highs and bull trigger at 151.97 - a level flirted with last week and helping draw the ire of Japanese authorities. Trade has so far favoured GBP and the USD, which fare better and keep EUR/GBP underpinned.
  • Much of the focus in Asia-Pac has been on the persistent weakening of the CNY, which approaching the upper-end of the 2% trading band for a second consecutive session on Wednesday. The PBOC's statement reiterated their stance that they would "resolutely" correct pro-cyclical behaviour and prevent the risk of the FX rate overshooting. The volatility in spot markets is helping stimulate demand for CNY hedges, resulting in solid CNY options demand across both Asia-Pac and European hours.
  • AUD/USD remains within the week's range, however short-term momentum continues pointed lower. Both the 50- and 200-dmas are trending downwards, keeping key support and the bear trigger within view at 0.6481.
  • The ISM Services Index and final US March PMI data take focus going forward, with markets expecting headline activity to tick higher, while the prices paid sub-gauge stays stubbornly above 58.0. The central bank speaker slate will be of note, with Fed's Powell speaking on the economic outlook from Stanford, while Bostic, Bowman, Goolsbee, Barr and Kugler are also set to make appearances.
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