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USD/CNH Can't Sustain 200-day EMA Break, Onshore Mkts Return On Monday

CNH

USD/CNH got to lows near 7.1950 in Thursday US trade. We sit slightly higher now, tracking near 7.2050 in the first part of Friday dealing. Intra-session lows from Thursday came under the 200-day EMA (which sits near 7.1990). The pair hasn't sustainable been sub this support point since the earlier part of 2024, see the chart below. On the topside, the 100-day EMA is back near 7.2250.

  • The CNH clearly enjoyed the softer dollar backdrop, as US yields fell. The market seemingly putting more weight on the dovish Wednesday FOMC lean rather than Thursday's firmer US data. Further yen gains were also a clear positive. CNH and JPY correlations (in level terms) still sit at 55% for the past 6 months.
  • China markets remain closed until Monday. Focus then will rest on the USD/CNY fixing, which should be aided by the lower USD levels in recent sessions (USD BBDXY off nearly 1% since Tuesday).
  • The equity backdrop has also been positive since Hong Kong markets returned yesterday, while the Golden Dragon index surged 6% in Thursday US trade. Attractive tech valuations and hopes of further stimulus to boost domestic demand have been positives.
  • The data calendar swings back into gear on Monday with the Caixin services PMI. On Thursday we have April trade figures.

Fig 1: USD/CNH & Key EMAs

Source: MNI - Market News/Bloomberg

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