USD/CNH Bears Eye Key Support

USD/CNH has shown through Tuesday’s base, with bears looking to the Nov 16 low (CNH6.3616). Any break there would expose the YtD low (CNH6.3525).

• Note that today’s move remains shallow, with the Caixin manufacturing PMI providing a modest contractionary headline print, missing wider expectations for modest expansion, potentially limiting the redback. The survey collators noted that “the manufacturing sector remained stable overall in November. Increased downward pressure and easing inflationary pressure were prominent features of the economic situation. From late October to mid November, there were sporadic new Covid outbreaks in several Chinese regions, which had a negative impact on the economy and particularly supressed the demand side. After the shortage of power was alleviated, the supply side began to recover. But due to weak demand, the supply recovery was limited, and the foundation of the recovery was not solid.”
• Elsewhere, we saw Chinese Vice Premier Liu He note that China is expected to exceed its economic growth target in ’21, while pointing to a focus on continuity and stability when it comes to broader macro policy in ’22. He also noted the well-known focus on support for SMEs.
• The yuan continues to benefit from trade dynamics, carry and index inclusion for Chinese government bonds.