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USDCNH Extends Gains As Safe Havens Back In Favour

FOREX
  • The offshore Yuan came under persistent pressure on Tuesday, extending losses throughout the US session. USDCNH broke through firm resistance at 6.50 in early trade and consolidated gains ahead of the US cash equity open.
  • Steady CNH supply saw losses extend, aided by headlines relating to Chinese software firm Hello withdrawing their plans for a US IPO, further weighing on sentiment. USDCNH remains close to the highs of the day around 6.5280 with some analysts now expecting a push towards the 2021 highs at 6.5876.
  • Sentiment certainly filtered through to other major G10 currencies, with the Japanese Yen the notable beneficiary. USDJPY sunk back through 110 and experienced 0.7% losses to reach 109.60. More significant moves seen in the crosses with AUDJPY (-1.00%) and in particular NZDJPY (-1.36%) bearing the brunt of the risk sell-off.
  • Links to the Chinese economy created headwinds for the New Zealand Dollar, matching CNH as the worst performing currency against the greenback, with 0.7% losses on the day.
  • GBPUSD shone once again, rising 0.55% and likely to close right on the highs just below 1.39. A break of yesterday's highs through 1.3833 sparked a quick 50 pip spike for cable, coinciding with a decent uptick in futures volumes approaching the WMR fix. The pair now trades within close proximity to the 100-day MA at 1.3925.
  • The market's focus now turns to the July Fed statement and press conference, due tomorrow. The FOMC will use the July meeting to debate its strategy to taper asset purchases (including timing, pace, and composition).
  • Also on Wednesday, both Australian and Canadian CPI data will be published.
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