CHINA: Country Wrap: Loan Prime Rates Unchanged
- Today’s fixing of the 1 and 5-year Loan Prime Rates was as expected with no change. The 1-year is the reference rate for corporate loans and the 5-year reference rate used by banks for mortgages. For a fourth straight month, we did not expect any change in the rates charged with the 1-year steady at 3.10% and the 5-year at 3.60%. (source: MNI – Market News)
- The decline in Foreign Direct Investment in China continued in January with reported numbers down -13.4%. FDI in Yuan terms was CNY97.5bn, according to the Ministry of Commerce. January’s result represents the twentieth consecutive month of decline in FDI and follows on from the 2024 result which was the weakest in eight years. Whilst January’s numbers were an improvement from the month prior, the worrying trend continues, as evidenced by Commerce Minister Wang and Vice Premier He meeting with Japanese delegations in a bid to improve bilateral ties. (source: MNI – Market News)
- China’s equity markets were very heavy today with the Hang Seng lower by -0.86%, CSI 300 -0.12%, and the Shanghai and Shenzhen Comp better by +0.08% and +0.74% respectively.
- CNY: Yuan Reference Rate at 7.1712 Per USD; Estimate 7.2874
- Bonds: as curve flattening continues in China, the CGB 10YR is up 2bp at 1.70%
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EURUSD TECHS: Pierces Trendline Resistance
- RES 4: 1.0630 High Dec 06
- RES 3: 1.0568 High Dec 10
- RES 2: 1.0461 50-day EMA
- RES 1: 1.0437 High Jan 6
- PRICE: 1.0379 @ 05:59 GMT Jan 21
- SUP 1: 1.0260/0178 Low Jan 15 / 13 and the bear trigger
- SUP 2: 1.0138 1.764 proj of the Sep 25 - Oct 23 - Nov 5 price swing
- SUP 3: 1.0097 2.0% 10-dma envelope
- SUP 4: 1.0031 2.000 proj of the Sep 25 - Oct 23 - Nov 5 price swing
The latest recovery in EURUSD appears corrective, however, the pair has breached the 20-day EMA, at 1.0346, and pierced trendline resistance at 1.0393, drawn from the Sep 30 ‘24 high. A clear breach of the line would expose the 50-day EMA at 1.0461. Clearance of this average would strengthen a bullish condition. Key support and the bear trigger is at 1.0178, the Jan 13 low. The medium-term trend condition remains bearish.
BUND TECHS: (H5) Corrective Cycle
- RES 4: 137.75 Low Dec 10
- RES 3: 135.15 High Dec 13
- RES 2: 132.41 20-day EMA
- RES 1: 132.15 Intraday high
- PRICE: 132.03 @ 05:37 GMT Jan 21
- SUP 1: 131.00 Low Jan 16
- SUP 2 131.00/130.28 Low Jan 16 / Low Jan 15 and the bear trigger
- SUP 3: 130.44 Low Jul 5 ‘24 (cont)
- SUP 4: 130.23 Low Jul 3 ‘24 (cont)
The Jan 15 rally in Bund futures highlighted a short-term reversal signal - a bullish engulfing candle. It suggests scope for a continued corrective phase that is also allowing an oversold trend condition to unwind. A continuation higher would open 132.41, the 20-day EMA. The medium-term trend is unchanged, it remains bearish. The bear trigger has been defined at 130.28, the Jan 15 low, a break would resume the downtrend.
CHINA: Country Wrap: Trump Delays Tariffs
- President Donald Trump held off unveiling China-specific tariffs on his first day in office, instead ordering his administration to address unfair trade practices globally and investigate whether Beijing had complied with a deal signed during his first term. (source: BBG).
- President Xi Jinping called for China to implement more proactive macroeconomic policies this year to maintain growth momentum as the world’s No. 2 economy could be facing new US tariffs. (source:BBG).
- China will promote Zou Lan, head of the monetary policy department at the People’s Bank of China, to deputy governor of the central bank, Reuters reports (source: BBG).
- China’s major equity bourses had a mixed day today with the Hang Seng up +1.05%, CSI 300 up +0.08%, Shanghai down -0.10% and Shenzhen down -0.10%.
- CNY: Yuan Reference Rate at 7.1703 Per USD; Estimate 7.2934
- Bonds: China’s 10YR saw yields lower today at 1.674%.
