USD/Yuan Back Above 7.30 ‘Line In The Sand’

A combination of the broader USD bid and the aforementioned moves/outflows surrounding Chinese equities helped USD/CNH to show above CNH7.3100 in early London trade, before retracing to CNH7.3075 last.

• Widening U.S./China benchmark rate differentials would have also aided the bid.
• Both USD/CNY & USD/CNH are above 7.3000 at typing, which, according to many, has represented a theoretical rough line in the sand for policymakers in recent weeks.
• Be on the lookout for continued background moves from state banks at these levels, while elongated and more meaningful forays above the mark would likely trigger firmer policymaker moves/liquidity altering action.
• YtD highs (CNH7.3497) present the obvious technical point of interest in USD/CNH if the move becomes more sustained, while Friday’s low (CNH7.2392) presents the initial bearish target.
• Thursday’s trade balance data presents the key Chinese data release over the next couple of sessions.