USD/CNH Cruises Higher After Six Days Of Losses

USD/CNH trades +47 pips at CNH6.4316 as we type, after posting an uptick despite the absence of notable headline flow at the time. The redback has ignored the PBOC fix, which came in at CNY6.4330, 5 pips above sell-side estimate.

• The rate has been heavy since mid-August but its sell-off has stalled around the CNH6.4261/44 area (Sep 10/3 lows), which limited losses yesterday. This area is located in close proximity to the 61.8% retracement of the May 31 - Jul 27 rally, located at CNH6.4198.
• Bears keep an eye on the aforementioned levels and a clean break below there would allow them to take aim at Jun 16 low of CNH6.3903. Bulls look to a rebound above Sep 7 high of CNH6.4648.
• Benchmark USD/CNY 1-year swap points snapped an impressive winning streak, which sent them to highest levels in six years earlier this week. The upward move indicated tightening liquidity conditions, amid the ongoing Evergrande saga and demand for the yuan ahead of the quarter-end/National Day holiday.
• That being said, a couple days ago RTRS spoke to traders who flagged that "some major state-owned banks were seen very actively swapping dollars for yuan in recent sessions," noting that these are often agents for PBOC policy. Elsewhere, the PBOC yesterday rolled over all CNY600bn of maturing 1-year MLF provisions, signalling intention to keep liquidity ample.
• The Securities Daily reported that the PBOC will most likely leave LPR rates unchanged this month, adding that it is unlikely for the PBOC to cut both the RRR and the policy rate.