CHINA: CNY Sells Off As RTRS Flag Potential For Depreciation To Counter Trump
USD/CNH quickly adds ~400 pips after RTRS sources state that “China's top leaders and policymakers are considering allowing the yuan to weaken in 2025 as they brace for higher trade tariffs in a second Donald Trump presidency.”
- The piece also noted that “the contemplated move reflects China's recognition that it needs bigger economic stimulus to combat Trump's threat of bigger tariffs, people with knowledge of the matter said.
- A reminder that the PBoC has reintroduced the countercyclical factor to its daily CNY mid-point fixing in the time since Trump’s election victory (see chart below for USD/CNY mid-point fixing vs. BBG survey median).
- That, coupled with the RTRS sources piece, suggests that the central bank could be quelling yuan losses for now to preserve room to depreciate the CNY on its own terms as a counter to any Trump tariffs.
- The RTRS piece also noted that “a third source privy to the central bank's thinking told Reuters the PBpC has considered the possibility the yuan could drop to 7.5-per-dollar to counteract any trade shocks.”
- The initial reaction has faded after Monday’s high in USD/CNH held (session highs of 7.2921 vs. Monday’s peak at 7.2927), with the pair now ~200 pips off session highs, last 7.2720.
- A break of Monday’s highs would expose CNH7.3000, which protects last week’s ’24 high (7.3148).
Fig. 1: USD/CNY Mid-point Fixing Vs. BBG Survey Median
Source: MNI - Market News/Bloomberg
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EQUITY TECHS: E-MINI S&P: (Z4) Northbound
- RES 4: 6070.16 1.382 projection of the Sep 6 - 17 - 18 price swing
- RES 3: 6033.58 1.236 proj of the Apr 19 - Jul 16 - Aug 5 price swing
- RES 2: 6028.44 1.236 projection of the Sep 6 - 17 - 18 price swing
- RES 1: 6040.50 High Nov 8
- PRICE: 6037.25 @ 07:19 GMT Nov 11
- SUP 1: 5927.25 High Oct 17 and a recent breakout level
- SUP 2: 5863.50/5724.25 20-day EMA / Low Nov 4
- SUP 3: 5675.25 Low Sep 18
- SUP 4: 5658.00 Low Sep 13
Bullish conditions in S&P E-Minis remain intact and last week’s gains reinforce current conditions. A key short-term support has been defined at 5724.25, Nov 4 low. The move higher last week resulted in a breach of the bull trigger at 5927.25, Oct 17 high, confirming a resumption of the primary uptrend. The 6000.0 psychological handle has been pierced. Sights are on 6070.16, a Fibonacci projection. Initial support is at 5927.25, the Oct 17 high.
BUNDS: Looking to close the opening gap
- Both Bund and Tnotes gapped lower overnight, but the divergence remains between Europe and the US.
- Overnight Volume in Tnotes (TYZ4) isn't too bad given Veteran's day, Cash markets are closed, but Futures are open.
- Bund is finding a small bid post cash open and still trades near the November high after it found some good rejection at the 2.50% level last week.
- The Opening gap in Bund is up to ~132.30, and Friday's high sits at 132.33.
- Above the latter, opens back to 132.73 initially.
- Main support is the 2.50% level in Yield, equated to 132.66 last Week.
- There's no Tier 1 data for the session, overall, it is a lighter Week on the Data front, UK Employment/GDP and especially the US CPI are at the forefront.
GOLD TECHS: Key Support Lies At The 50-Day EMA
- RES 4: $2814.7- 3.618 proj of the Jul 25 - Aug 2 - Aug 5 price swing
- RES 3: $2800.0 - Round number resistance
- RES 2: $2790.1 - High Oct 31 and the bull trigger
- RES 1: $2707.59/2750.0 - 20-day EMA / High Nov 5
- PRICE: $2672.2 @ 07:15 GMT Nov 11
- SUP 1: $2647.4/2643.5 - 50-day EMA / Low Nov 7
- SUP 2: $2628.2 - Low Oct 11
- SUP 3: $2604.9 - Low Oct 8
- SUP 4: $2547.0 - Low Sep18
The trend condition in Gold is unchanged, it remains bullish and the latest pullback appears corrective. The yellow metal has cleared the 20-day EMA and this highlights potential for an extension of the corrective cycle. Attention is on a key support at $2647.4, the 50-day EMA. A clear break of this average would expose $2604.9, the Oct 8 low. For bulls a reversal higher would refocus attention on the bull trigger at $2790.1, the Oct 31 high.
