CNH: USD/CNH At Fresh Lows For 2025, But Lags Broader Dollar Weakness

• 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: 96.620 @ 15:16 BST Aug 15
• 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 gapped sharply higher on the back of the soft US NFP data, and this week’s CPI print should also prove supportive. Recent price action has narrowed the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead strengthen a bearish theme. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would refocus attention on 96.860, the Apr 7 high.

J.P. Morgan stays bearish the USD and outlines catalysts for a resumption of dollar weakness, see below. 

J.P. Morgan: "Catalysts for a resumption of USD weakness. We stay bearish USD with a preference for cyclical currencies favouring the euro bloc/ EMEA region.
For high intensity USD weakening, US data needs to slow further or market concerns on Fed independence need to intensify... ...or a Russia / Ukraine ceasefire that lowers energy prices needs to be realised, but the bar for delivery is high.

In the absence of these, markets would revert to data watching mode to confirm US moderation/ growth improvement ex-US. This would still be conducive for USD weakness, albeit with lower intensity.

The USD smile remains asymmetric: USD hasn’t been strengthening on vol shocks, but has been weakening when vol declines.
We discuss the FX implications of a Russia / Ukraine ceasefire, if realised. Energy prices will be the main transmission mechanism......an outcome that lowers energy prices would be USD-negative with weakness most pronounced against commodity importers and high beta euro bloc/ EMEA FX such as SEK or CE3 and would be worth 2.5% on EUR/USD.

In DM, stay short USD vs. EUR, Antipodeans, CAD and JPY. Take modest profits on short CAD/NOK and buy NZD/SEK ahead of central bank meetings. In EM, we stay overweight FX across regions.

G10 FX targets: Mostly unchanged except for USD/JPY whichis marked-to-market for 3Q (146 from 141); 1Q26 139. EUR/USD 1.22, AUD/USD 0.68.
EM: CNY upgraded on lower US rates, better-than-expected equity returns. USD/CNY 4Q 7.10 (7.15), 2Q’26 7.05 (7.10). USD/INR 2Q26 85.30, USD/MXN 19.40, USD/BRL 5.75 unchanged." 

The global bank maintains a bearish USD outlook, see below for more details. 

Goldman Sachs: "We expect the Dollar to depreciate largely because US economic performance no longer supports the currency’s high valuation, and we think the softening labor market is providing late-summer support to that view. But our read of both the incoming data and latest Fed speak is consistent with our baseline expectation of some further room to run in front-end rates. And we expect the Dollar can continue to underperform its typical relationship with other cyclical assets. This is in part because FOMC participants advocating for a more restrained pace of cuts than our baseline of three sequential 25bp cuts often note the contraction in labor supply as a reason to be less concerned. However, a lower “breakeven” payrolls pace also implies a weaker potential growth rate (and lower short-term neutral), which is negative for the Dollar if it persists, albeit in less dramatic fashion. We also think the inflation data this week are consistent with our view that consumer prices are unlikely to be a material source of constraint on policymakers, and in our view the PPI data mostly highlight the volatile and uncertain operating environment firms are facing. Finally, it is worth noting the signal in the noise of a choppy week in FX. First, some of the largest moves came on concerns that the monthly employment situation report could be suspended. While the White House later clarified these remarks, it is clear that institutional governance remains an important issue for FX investors in particular, and we think this can lead to some incremental Dollar depreciation as global asset allocators reassess their safe-haven investments for a number of reasons. Second, much of the Dollar’s dip over the course of the week can be attributed to either quiet markets—which we think reveals the “easiest” direction of travel—and foreign developments, such as BoJ rate hike speculation. The latter is important because foreign “help” will be increasingly important for this trend to continue now that valuations have become somewhat less favorable."