USDCNH is off its early highs but still up....>

CHINA: USDCNH is off its early highs but still up on the day as the 6.70 level

now acts as support. Upside pressure is building amid renewed fears over

US-China trade talks and increasingly dovish PBOC policy. The Jan 22 high at

6.8188 is the next upside target, above which would reignite upside momentum. 

- After a few weeks of outperformance regional yuan crosses are giving back

gains with CNHJPY threatening to roll over should the 21-dma give way just below

current levels. CNHKRW is also just off daily lows as the 200-dma support level

comes back into play. 

- The ongoing narrowing between the 12 month NDF outright and USDCNH suggests

caution is warranted from a contrarian perspective as depreciation fears have

receded.

- The reopening of Hong Kong stocks has been met with selling pressure with the

Hang Seng down .06% and the Hang Seng China Index down almost 1.0%, although

both indices have recovered most of their early losses. Both the HSI and HSCEI

are looking to recover their 200-dmas after losing these levels at the open.