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USD/CNH remains in consolidation mode......>

CHINA FX
CHINA FX: USD/CNH remains in consolidation mode despite more hostile language
from Trump toward the "plague from China" and as MNI sources report that China
are said to want easier US trade deal terms as they are unlikely to meet import
commitments.
- The 50-dma remains near-term support at 7.0754 as well as the uptrendline
drawn from the Apr10 low which today intersects at 7.0886. The May highs at
7.1561 look out of reach for now.
- In options space, skew has settled considerably from the March unrest, but the
shorter-end of the risk reversals curve remains (slightly) elevated above the
pre-Coronavirus crisis highs. For the past few session, CNY hedging via options
has been slower vs. recent averages, but Wednesday trade has been a little more
busy. Wednesday's put/call ratio is skewed heavily toward USD/CNY calls, with
call strikes as high as 7.65 in firm demand. This was typified by one of the
larger trades of the day so far, with trades consistent with a 7.15/7.40 3m call
spread crossing at the Asia/EU crossover.
- Industrial production and retail sales due Friday take focus going forward.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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