CNH: USD/CNH Breaks Lower Amid Stronger CNY Fixing Trend, Higher Equities
Spot USD/CNH broke definitively lower as Thursday's session unfolded. The pair getting to lows of 7.1183 in the US session and we track near 7.1200 in early Friday dealings. CNH rose 0.47% for Thursday's session, marginally outperforming broader USD softness, with the BBDXY down 0.30%, the DXY off close to 0.35%. Spot USD/CNY finished up at 7.1307, while the CNY CFETS basket tracker edged a little higher to 96.58.
- Thursday's gains in CNH and onshore CNY spot closed the gap with the recent stronger fixing trend, see the chart below (spot USD/CNY plotted versus the fixing level). The USD/CNY fixing is trending towards Nov 6 2024 levels just under 7.1000 (yesterday's outcome was 7.1063).
- For USD/CNH technicals, downside targets are likely to rest for a test under 7.1000. Early Nov lows came in last year at 7.0869 and 7.0906. Also note, this week's move puts USD/CNH price below the 61.8% retracement for the upleg posted off the September low of 6.9713. On the upside, recent lows have rested in the 7.1400/7.1500 region, which may now act as upside resistance points. The 50-day EMA is at 7.1785.
- USD/CNH implied vols finally rose, with the 1 month spiking to 3.39%, after spending much of August sub 3.00%.
- Local equities rebounded strongly yesterday, with the CSI 300 up 1.77%, while Hong Kong's HSI fell 0.81%. Via BBG: " Investors in mainland China sold a record HK$20.4 billion ($2.6 billion) worth of Hong Kong-listed stocks on Thursday, a sign the country’s army of investors are returning to their local market amid a breakneck rally. " Another potential CNY positive.
- The local data calendar is empty today, with Sunday delivering August PMI outcomes. Manufacturing is expected to remain in contraction (49.4, versus 49.3 in July).
Fig 1: USD/CNY Spot & USD/CNY Fixing
Source: Bloomberg Finance L.P./MNI
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ASIA: Coming Up In Asia Pac Markets On Wednesday
| 0200BST | 0900HKT | 1100AEST | New Zealand July ANZ Business Confidence |
| 0230BST | 0930HKT | 1130AEST | Australia Q2 CPI |
| 0230BST | 0930HKT | 1130AEST | Australia June CPI |
| 0300BST | 1000HKT | 1200AEST | South Korea June Retail Sales |
Source: Bloomberg Finance L.P./MNI
USDCAD TECHS: Pierces The 50-Day EMA
- RES 4: 1.4016 High May 12 / 13
- RES 3: 1.3920 High May 21
- RES 2: 1.3862 High May 29
- RES 1: 1.3798 High Jun 23 and a key near-term resistance
- PRICE: 1.3771 @ 19:05 BST Jul 29
- SUP 1: 1.3679/3557 20-day EMA / Low Jul 03
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
A short-term correction in USDCAD remains in play. However, note that price has traded through the 50-day EMA at 1.3728. A clear breach of this average would highlight a stronger short-term reversal, exposing 1.3798, the Jun 23 high. Clearance of 1.3798 would strengthen a bullish condition. On the downside, 1.3540, the Jun 16 low, marks key support. A break of this level would resume the downtrend.
US TSYS: Treasuries Bid Ahead FOMC, Strong 7Y Sale, JOLTS Jobs Recede
- Treasuries look to finish near late session highs, TYU futures back at last week's highs on July 22 as markets consolidate ahead of tomorrow's FOMC rate annc.
- A strong 7Y note auction helped rates extend highs after the $44B note sale (91282CNR8) stopped through again: 4.092% high yield vs. WI of 4.120%; bid-to-cover 2.79x from 2.46x prior. Peripheral stats: Indirect take-up retreats to 62.26% vs. 76.74% prior; Direct take-up climbed to new high at 33.68% vs. 11.62% prior; Dealers fell to new low of 4.06% vs. 11.64% prior.
- First half support: Tsys extended highs briefly after lower than expected JOLTS openings, quits level lower (prior down-revised), layoffs broadly lower than expected. Prior to JOLTS, little react to Advance Goods Trade Balance, import decline and less negative goods export. Wholesale inventories slightly higher than expected, retail inventories in-line.
- Tsy Sep'25 10Y contract trades +19 at 111-11.5 vs. 111-12.5 high; nearing initial technical resistance at 111-14.5 (High Jul 22). A clear break would highlight a stronger reversal and open 111-28, the Jul 3 high. Key support remains intact at 110-08+, the Jul 14 and 16 low. A move through this support would reinstate a bearish theme.
- Curves bull flatten: 2s10s -3.051 at 44.734, 5s30s -3.148 at 95.557.
- Cross asset: Bbg US$ index firmer but off highs: BBDXY +1.65 at 1209.76 (1212.47 high); stocks moderately lower (SPX eminis -19.75 at 6403.0); gold firmer +9.30 at 3323.91.
