CNH: CNH Underperforms Softer USD Indices, LPRs Seen On Hold Today
USD/CNH sits near 7.2360 in early Wednesday dealings, tracking within recent ranges. For Tuesday's session we ended little changed in aggregate, which underperformed moderately softer USD index outcomes (BBDXY down 0.15%). Recent lows rest at 7.2250 for the pair, while highs of 7.2665 came in on Nov 14. USD/CNY spot finished up near 7.2400, leaving a modest negative USD/CNH-USD/CNY bias at current levels. The CNY CFETS basket tracker finished up near 99.77 (per BBG), off 0.25% for Tuesday's session.
- For USD/CNH we are still comfortably above all key EMAs. The 20-day is the nearest, close to 7.1900. ahead of this the simple 200-day MA is near the 7.2000 level.
- The negative USD/CNH-USD/CNY basis has not been sustained for long periods in 2024. Tighter CNH liquidity has been evident, which may be weighing on USD/CNH at the margins.
- Our London team noted the recent correlations between Treasury Secretary odds for Howard Lutnick and broader USD shifts. Lutnick was seen as one of if not the most pro-tariff candidates for the Tsy position, with tariffs generally seen as USD positive/foreign currency negative. Overnight, headlines crossed of Lutnick being nominated for the Commerce position, so a broadly softer USD is in line with Lutnick out of the running for the Tsy position.
- Still the benefits for the yuan from this outcome, which is one of the major currencies in the cross hairs from higher tariffs, have bene limited in recent sessions.
- Note today's calendar has the 5-yr and 1-yr loan prime rate outcomes, which are seen unchanged at 3.60% and 3.1% respectively.
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CNH: USD/CNH Supported At 50-day EMA, 1yr & 5yr LPRs To Fall Today
USD/CNH tracks near 7.1200 in early Monday dealings, close to levels that prevailed for much of Friday's session, post the Asia close. We did have brief dip sub 7.1100 in US trade but that was supported. CNH gained 0.26% for Friday's session, it's only positive gain for last week. USD/CNY spot ended up at 7.1022. The CNY CFETS basket tracker ended up at 99.195 down slightly for last week.
- For USD/CNH, intra-session Friday lows coincided nicely with the 50-day EMA near 7.1100. On the topside we have the 100-day EMA at 7.1488. Lower front end US yields likely helped CNH at the margins, while broader USD sentiment was also softer.
- Equity sentiment was positive on Friday, the CSI 300 finishing 3.62% higher, as gains were buoyed by the PBoC revealing take up of the swap facility designed to support local equity market liquidity.
- In US trade, the Golden Dragon index rose just over 3%, although still finished comfortably down for the week.
- Today we have the 5yr and 1yr LPRs, which are expected to be cut by 20bps each, per consensus. This would follow earlier cuts in September to the 7-day repo and MLF rate.
- We are also due the 1yr MLF sometime before the 25th of Oct. No change is expected from the current 2.00% rate.
CNH: AUD: AUD Holding Recent Ranges, RBA Deputy Gov Fireside Chat Today
AUD/USD was mostly range bound between 0.6700/0.6720 post the Asia close on Friday. We track near the mid-point of this range in early Monday Asia Pac dealings. The A$ ended Friday's session with a modest 0.15% gain, as broader USD sentiment softened (BBDXY down 0.24%).
- AUD gains are considered corrective from a technical standpoint. The 20-day EMA sits higher at 0.6757, while key downside support is 0.6622 the Sep 11 low (before that the Oct 16 low rest at 0.6658).
- A tick down in US yields, led by the front end on Friday, helped AUD sentiment at the margins. Global equity sentiment was mostly positive as well, with the SPX up (0.40%), Nasdaq +0.63%).
- The Bloomberg aggregate commodity index was off slightly, with oil prices lower on Friday. The Bloomberg metals sub index rose 1.18%, with China related asset sentiment more positive (CSI 300 up 3.62% on Friday). Iron ore is softer though back near $101/ton.
- The data calendar is quiet to start the week, while RBA Deputy Governor appears in a fireside chat at 12pm AEDT.
AUSSIE 10-YEAR TECHS: (Z4) Through First Support
- RES 3: 96.975 - High Mar 14
- RES 2: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- PRICE: 95.705 @ 15:55 BST Oct 18
- SUP 1: 95.655 - Low Oct 18
- SUP 2: 95.525 - Low Jul 2
- SUP 3: 95.430 - Low Apr 26 (cont)
Aussie 10-yr futures remain weak on the back of stellar domestic jobs numbers, prompting prices to come under further pressure into the Thursday close. This counters the recent bullish set-up. Prices fell through 95.850 Friday, narrowing the gap with the next key support on further weakness at the Jul 2 low of 95.525. Any recovery and clear break higher would confirm a resumption of the uptrend and pave the way for an extension towards 96.207, a Fibonacci retracement. The bear trigger has been defined at 95.525, Jul 2 low.
