CNH: USD/CNH Breaks Lower, Amid Multiple Supports, Focus On CNY Fixing Today
USD/CNH broke lower as Tuesday trade unfolded. We dipped briefly under 7.0800, fresh YTD lows, before stabilizing somewhat. We track around 7.0820/25 in early Wednesday dealings. We posted a 0.33% rise in CNH terms for the session, broadly matching USD index falls. Optimism around US-China relations, along with broader USD softness contributed to the move (Fed easing expectations weighed on US Tsy yields). Spot USD/CNY finished up just under 7.0850, while the CNY CFETS basket tracker was little changed at 98.21.
- Technical wise for USD/CNH, we may target round figure support at 7.0500, levels last seen in Oct 2024, while beyond that rests the 7.00 figure level. All key EMAs are trending lower, while recent lows were marked just above 7.0900, with this region and up to 7.1000 potentially short term resistance.
- US-CH yield differentials continue to track lower, the 2yr spread back near +200bps. We saw dovish remarks from the Fed's Miran, while NEC Chair Hassett is seen as the front runner to replace Fed Chair Powell next year, which further contributed to the move.
- US Tsy Secretary Bessent also stated that Trump and China President XI may meet four times in 2026, via BBG: "The US leader is going to visit Beijing and will likely attend the APEC summit in Shenzhen, while the Chinese President may also make a state visit to America and attend the G-20 gathering in Florida, meetings that give the US-China relationship “great stability,” according to Bessent"
- Focus today will be on the USD/CNY fixing and whether it encourages further yuan gains. The local data calendar is empty until tomorrow's Oct industrial profits print.
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FOREX: A$ & NZ$ Rise On Likely US-China Trade Deal & US CPI Data
Aussie and kiwi received support from two key events – the better-than-expected US September CPI data and news that a draft US-China trade deal has been reached with it expected to be agreed by Presidents Trump and Xi when they meet on Thursday. It includes a year’s delay to China’s rare earths licensing regulations and should mean that the additional 100% US tariff won’t be imposed on November 1. The USD index finished slightly higher.
- AUDUSD jumped to a high of 0.6529 on Friday following US CPI printing at 3.0% - 0.1pp below consensus. It then rose to 0.6547 on the US-China trade news and is currently up 0.3% to 0.6534. It hasn’t held the break above the 50-day EMA at 0.6543. The pair remains in consolidation mode.
- NZDUSD reached 0.5774 after the US data before settling between 0.5745/0.5750. Monday it made a high of 0.5788 and is now 0.4% higher at 0.5774.
- With both AUDUSD and NZDUSD close to flat on Friday AUDNZD was slightly higher at 1.1330. The pair traded in a narrow range through Friday of 1.1300/1.1333. It has started today’s trading around 1.1319 after initially rising to 1.1341.
- Stronger equities also provided support with the S&P up 0.8% and Euro stoxx +0.1%. Oil prices were lower with Brent -0.5% to $65.69/bbl. Copper was up 0.1% and iron ore is around $104/t.
- Later on Monday RBA Governor Bullock participates in a fireside chat at the ABE dinner at 1915 AEDT. There are no data in Australia or NZ on Monday with the latter closed for a holiday.
CNH: USD/CNH Eyeing Break To Fresh Oct Lows, Bessent Says 100% Tariff Risk Gone
USD/CNH is lower in early Monday trade, as markets digest positive weekend news around US-China talks. We got to lows of 7.1159, (after opening at 7.1251), but sit slightly higher now. Recent lows have been marked in the 7.1160/70 region, so this will remain a downside focus point. A clear break lower should bring the 7.1000 back into focus. The 20-day EMA is back around 7.1300, a likely upside resistance point, but with positive headlines around US-China talks the market focus is likely to remain on downside risks for the pair.
- Via BBG: "A Chinese official said the two sides reached a preliminary consensus on topics including export controls, fentanyl and shipping levies, while US Treasury Secretary Scott Bessent said Trump’s threat of 100% tariffs on Chinese goods “is effectively off the table”.
- This comes ahead of the Thursday meeting with US President Trump and China President Xi in South Korea, on the sidelines of APEC summit. The weekend talks are expected to pave the way for a deal/agreement at the Thursday meeting between the two leaders and Trump expressed confidence in such an outcome.
- Market odds of a 100% tariff hit on China by Nov 1 were quite low, never getting above 20 last week per Polymarket. Hence upside momentum for USD/CNH has been fairly modest, which may in turn limit any sharp retracement lower, at least from a positioning shift standpoint. This also fits with the generally low beta moves for USD/CNH around broader dollar trends. The other focus today will be the USD/CNY fixing.
- On the data front, note we get Sep industrial profits (prior was +20.4% y/y).
ASIA: Government Bond Issuance Today
- Bank of Korea to Sell KRW900bn 91-Day Bonds
- South Korea to Sell KRW2.9tn 5-Year Bonds
- Philippines To Sell PHP 7.0Bln 91D Bills (PH0000059818)
- Philippines To Sell PHP 7.5Bln 182D Bills (PH0000060279)
- Philippines To Sell PHP 7.5Bln 364D Bills (PH0000061178)
