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USD/CNH Can't Break To Fresh December Lows

CNH

(MNI Australia) CNH has tracked higher over recent sessions, as optimism grows around China's outlook for 2023 amid a further reduction in covid restrictions (most notably around international travel). USD/CNH did find support sub 6.9600 through Tuesday's session. The pair last tracked around 6.9700. We are comfortably off pre-Christmas highs close to 7.0100.

  • Focus likely rests on lows from Dec 5 near 6.9300, likewise from mid-December near 6.9400, in terms of downside targets.
  • A sharper fall in USD/CNH may not have materialized due to holiday-related trading conditions. The market may also be mindful that easing international travel restrictions may rewiden the China services travel deficit. Pent up demand to travel offshore form China residents is likely larger than demand to enter China, at least in the near term.
  • Yield differentials are also tracking back in favor of the USD, which could be another constraint on short-term downside in the pair.
  • Yesterday industrial profits slipped to -3.6% YTD y/y, versus -3.0% prior. The next major data release is on Saturday when official December PMIs are due.
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