PBoC Fix Accelerates Move Beyond Uptrend Support In USD/CNH, Key Support Moves Closer

USD/CNH is off session lows, with the broader USD also off worst levels.

• The latest firmer-than-expected PBoC fix provided impetus for fresh yuan strength.
• The rate bottomed out at CNH7.1299, before recovering to trade around CNH7.1425 last.
• Fresh multi-month lows were registered on the move.
• Yesterday’s sharp move lower resulted in a break of the uptrend support drawn off the February lows.
• That exposes the 200-DMA (CNH7.1283 today). A break there would open the July ’23 low/key support (CNH7.1161).
• Implied vol. is further away from early Nov troughs, given the PBoC’s continued lean via the mid-point fix and extension of the spot move.
• Recent RTRS headlines flagged state-owned banks acquiring USD in the swaps market and then selling in the spot space (more on that here).
• State-backed media outlets ran analyst comments projecting the extension of the yuan rally owing to the end of the global interest rate hiking cycle and a slowdown for the global economy.
• HK-China Stock Connect net flow was essentially flat on the day.
• In the background there is plenty of focus on CNH-positive seasonals ahead of year end, while others speculate that the recent yuan rally provides the PBoC with a wider easing window.