CNH: USD/CNH Back Sub 200-day EMA Support, China To World Equity Ratio Surges

USD/CNH tracked near 7.2280 in latest dealings, CNH gaining 0.50% for Tuesday's session. This was close to USD index losses (BBDXY down 0.46%), as the EU bloc currencies continued to rally. CNH did outperform safe havens like JPY though. USD/CNY spot finished up at 7.2302. The CNY CFETS basket tracker was still lower though at 98.83, per BBG (off a further 0.12%). 

• USD/CNH is now back under its 200-day EMA (near 7.2385). Further downside could see 7.2000 round figure support tested.
• Focus is likely to rest on whether we see any material shift in the USD/CNY fixing today, with the fixing not drifting too from 7.1700 for an extended period of time.
• The rebound in core yields didn't impact CNH sentiment meaningfully. Yesterday saw onshore equities close higher, the CSI 300 up 0.32%. The China to global equity ratio is now above early Oct highs, see the chart below, the white line (note USD/CNH is inverted on the chart).
• Unwinding of US exceptionalism plays, coupled with inflows into China related equities, with Hong Kong seeing strong inflows from the mainland, while inflows from South Korea into Hong Kong equities have also picked up, is likely aiding broader underlying China related asset sentiment, including the yuan. Regulators also vowed to boost long term funds into equity and other capital markets (see this BBG link).
• Bloomberg states though that trade talks between the US and China are stuck at lower levels. This could limit USD/CNY downside if little progress is seen over the medium term. 

Fig 1: China To World Equity Ratio & USD/CNH (Inverted)