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USD/CNH Back Sub 20-EMA As US Yields Fall, Caixin Services PMI Out Today

CNH

USD/CNH was softer post the Asia close on Tuesday. We got near 7.2400 before finding some support. The pair tracks around 7.2470 in latest dealings after posting a modest gain in CNH terms for Tuesday trade. Broader USD indices were close to unchanged, but this masked significant divergence within the G10 space as JPY and CHF outperformed the rest of the bloc. USD/CNY finished up near 7.2400, little changed versus end Monday levels.

  • The CNH received benefit from stronger yen levels, while in US trade we saw weaker than expected JOLTS job opening data, which weighed on US yields. US-CH government bond yield differentials sit comfortably off recent highs. The 2yr spread is back close to +300bps (recent highs around +317bps).
  • Current USD/CNH levels put us just under the 20-day EMA (near 7.2500), while the 50-day EMA is back at 7.2420, which is close to intra-session lows from Tuesday. Earlier June highs rest just above 7.2640.
  • On the data front today the May Caixin services PMI is out. The market expects a 52.5 print, unchanged from April.
  • On the sell-side, J.P. Morgan suggests a 10bps rate cut by the PBoC may be delivered this month and then another in Q4, although risks are skewed towards only one cut, given uncertainty around Fed cut timing/magnitude this year (per BBG).
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