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USDCNY Continues Its Bull Retracement, EM FX Remains Vulnerable in ST

CHINA
EM BulletFixed IncomeBulletMarketsEmerging MarketsForeign Exchange
  • In addition to the global risk off environment triggered by the renewed geopolitical tensions and rising recession risks (particularly in Europe), the significant CNY depreciation has been weighing on FM FX in the past month.
  • To the exception of the RUB, all EM currencies are down in Q2, with ‘risk on’ ZAR being the worst performing currency, down nearly 10% against the USD.
  • Selling pressure on CNY has remained elevated this week, with USDCNY finding resistance at 6.80 on Thursday.
  • A break above that level would open the door for a move up to 6.8450, which corresponds to the 61.8% Fibo retracement of the 6.307 – 7.1780 range.
  • China easing policy has been mainly reflected in the exchange rate (so far), as equities remain vulnerable in the near term despite the rebound in liquidity this year.
  • Hang Seng Index keeps trading below the 20,000 level and is down over 20% since its early February high.

Source: Bloomberg

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  • In addition to the global risk off environment triggered by the renewed geopolitical tensions and rising recession risks (particularly in Europe), the significant CNY depreciation has been weighing on FM FX in the past month.
  • To the exception of the RUB, all EM currencies are down in Q2, with ‘risk on’ ZAR being the worst performing currency, down nearly 10% against the USD.
  • Selling pressure on CNY has remained elevated this week, with USDCNY finding resistance at 6.80 on Thursday.
  • A break above that level would open the door for a move up to 6.8450, which corresponds to the 61.8% Fibo retracement of the 6.307 – 7.1780 range.
  • China easing policy has been mainly reflected in the exchange rate (so far), as equities remain vulnerable in the near term despite the rebound in liquidity this year.
  • Hang Seng Index keeps trading below the 20,000 level and is down over 20% since its early February high.

Source: Bloomberg