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Downtrend Extends

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Spot USD/CNH see-sawed within a 112 pip range today, but is now back at almost unchanged levels. The Evergrande situation has returned to the fore and USD/CNH went offered as local media reported that the real-estate giant has paid interest on its dollar bond due Sep 23. The grace period after which a missed payment would become a default expires tomorrow. The yuan struggled to hold onto resultant gains and USD/CNH last trades at CNH6.3944, barely changed on the day.

  • Today's PBOC fell virtually in line with sell-side estimate today after two consecutive misses. The fixing missed forecasts by 14 and 27 pips on Thursday and Wednesday respectively, as China's central bank showed discomfort with a stronger yuan.
  • The PBOC have circulated the text of a speech from Gov Yi, who said that keeping a normal monetary policy and banks' interest margin level in a reasonable range may be conducive for economic growth and financial stability.
  • Looking ahead, China's industrial profits will be published next Wednesday. This will be the only notable local release next week.
  • Bears look for a clean break under Oct 19 low/trendline support at CNH6.3687/6.3671, while bulls would be pleased by a jump above Oct 19 high of CNH6.4290.