CNH: USD/CNH Edges Up On USD Rebound, Trump/Xi Call Scheduled For 9am ET

• 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: 96.580 @ 15:46 BST Aug 19
• 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 recent soft US NFP data, and last 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.

Very low volatility persists for the yuan. USD/CNH sits near 7.1875 in early Wednesday dealings, after little movement in Tuesday's session. Broader USD indices were up for the session, albeit not at the same pace seen from Monday. Most of the USD gains were against higher beta FX, with weakness in US equities helping the move. Spot USD/CNY finished up at 7.1824, while the CNY CFETS basket tracker rose 0.13% to 96.20 (per BBG).

• Well worn ranges persist for USD/CNH as a catalyst for a range break remains absent. We sit close to the 20 and 50-day EMA points, while upside focus will rest with any retest above 7.2000. August lows at 7.1681 remain intact. 1 month implied USD/CNH vol is tracking towards 2024 lows, see the chart below.
• The Golden Dragon equity index fell 0.90% in US trade, but the China to global equity ratio sits close to late July highs, although this isn't providing much positive impetus to CNH at this stage.
• Via BBG: "Money managers are scaling back their bearish stance on China, adding technology and consumer stocks to their portfolios amid a four-month-long rally, according to an HSBC Holdings Plc survey." (see this link).
• US-CH government bond yield differentials remain within recent ranges. Note today we have the 1yr and 5yr loan prime rate decisions. No change is expected (1yr currently at 3.00%, 5yr at 3.50%), as these metrics have taken on less policy relevance over the past 12 months. 

Fig 1: USD/CNH Implied 1 month Volatility 

Source: Bloomberg Finance L.P./MNI 

Overnight the whole milk powder auction (held around 2 times per month) saw average prices rise 0.3% to $4036. The chart below overlays this series versus the Citi NZ terms of trade proxy. Whole milk powder prices are up from recent lows but still around 7.7% off 2025 highs (albeit presenting a supportive backdrop for NZ's terms of trade). 

• BBG noted: "The GDT price index change, which is a weighted average of the percentage changes in individual milk products between trading events, was a decrease of 0.3%." See this link to GlobalDairyTrade website. 

 Fig 1: NZ Whole Milk Powder Prices & Citi NZ Terms Of Trade 

 Source: Citi/Bloomberg Finance L.P./MNI