CNH: Familiar Ranges Prevail, Trade Talks Continue, Details Awaited
USD/CNH tracks near 7.1900 in early Wednesday dealings. CNH lost a little ground on Tuesday, but remains within recent ranges. Broader USD sentiment saw a small uptick in USD indices. USD/CNY ended up at 7.1878, while the CNY CFETS basket tracker edged down a little to 95.71, slightly above recent cycle lows.
- Late in yesterday's Asia Pac session we saw China and Hong Kong equities weaken, which saw some negative spill over to CNH (Tuesday highs for USD/CNH were at 7.1943). The CSI 300 finished down 0.51%, while Hong Kong stocks moved up from lows but still finished down a touch.
- Concern over US-China trade talk progressions was cited for the weakness, but US officials continued to talk up positive progress from the talks as Tuesday's session unfolded (this helped push US stocks higher, while the Golden Dragon index rose 0.30% in US Tuesday trade).
- US Tsy Secretary Bessent stated "...he had to return to Washington in order to testify before Congress. US Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer planned to continue discussions with their Chinese counterparts “as needed,” Bessent said." (via BBG). We may see more details emerge later today, while Commerce Secretary Lutnick stated talks could continue into Wednesday if needed.
- Locally, we still await May aggregate finance/new loans data.
- For USD/CNH, the 20-day EMA is near 7.1980 in terms of topside resistance, but very narrow ranges continue to prevail. The 200-day EMA is close to 7.2410 on the topside, while recent lows were marked at 7.1645.
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AUSSIE 3-YEAR TECHS: (M5) Within Range of Highs
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.610 @ 15:20 BST May 9
- SUP 1: 95.900 - Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures continue to circle just below recent contract highs, having cleared resistance on the continuation contract. The rally has taken out resistance at 96.730, the Sep 17 ‘24 high. On the downside, any reversal lower from current levels would signal a resumption of a downtrend. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low.
FOREX: USD Up Against Safe Havens, A$, NZD Outperform On Trade Headlines
The early G10 tone is USD positive against the majors, albeit still in light liquidity conditions before all Asian markets get underway. There is focus on earlier news stories from US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland.
- AUD, NZD and CAD are all outperforming, although gains against the USD are modest at this stage and more prominent against the likes of yen. USD/JPY was last above 146.00, last near 146.20 (up nearly 0.60% from end Friday levels in NY).
- USD/CHF is tracking near 0.8350, up +0.40%. Both pairs are around multi week highs. EUR/USD was down to 1.1210/15 in latest dealings off 0.30%.
- AUD/USD was up a touch to 0.6420/25, NZD/USD near 0.5925, around 0.25% firmer.
- USD/CNH is down to 7.2250/55, around 0.20% stronger for the session so far in CNH terms. This pair remains within recent ranges though.
- Focus is now on details from the trade talks, with Reuters quoting US Trade Representative Greer that an agreement has been reached to lower the trade deficit. More details are expected from the US side on Monday, while Rtrs also noted China officials were expected to brief reporters Sunday evening Geneva time (although it is getting closer to midnight). A joint statement was also expected to be released per newswire reports.
US-CHINA: Officials State "Substanial Progress" From Weekend Trade Talks
Headlines have crossed from both the US and China sides on 'substantial progress' made in terms of trade talks held over the weekend in Switzerland.
BBG notes: "The US and China both reported “substantial progress” after two days of talks in Switzerland aimed at de-escalating a trade war, marking what Chinese Vice Premier He Lifeng called “an important first step” toward resolving differences." "While neither side immediately announced specific measures on Sunday, He said the world’s two biggest economies agreed to create a mechanism for further talks, led by US Treasury Secretary Scott Bessent and himself. Bessent said the US would share details on Monday and He promised a joint statement." see this link for more details.
Reuters stated: "U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer said on Sunday they reached a deal with China to cut the U.S. trade deficit, describing "substantial progress" in high-stakes talks with Chinese officials but offering no details as two days of negotiations concluded in Geneva." See this link.
- The market now awaits more details. Rrts noted that China officials were expected to talk to reporters later on Sunday evening Switzerland time.
