CNH: USD/CNH Edges Up On USD Rebound, Trump/Xi Call Scheduled For 9am ET
USD/CNH probed above 7.1130 as the US session unfolded on Thursday, amid broader USD gains. We track near 7.1090 in early Friday dealings, having lost 0.11% for Thursday's session. Dollar indices rose, with both the DXY and BBDXY indices gaining over 0.40%. Spot USD/CNY ended up at 7.1124, while the CNY CFETS basket tracker rose 0.13% to 96.20 per BBG.
- Carry over gains in the USD were seen as the market digested the Fed outcome (where there was a lack of conviction on the FOMC about the rate path forward), while better-than-expected US jobless claims and Philly fed data then bolstered the relief rally further on Thursday. US Tsy were 1-3bps higher, led by the back end of the curve.
- For USD/CNH technicals, upside focus may rest at 7.1280 the 20-day EMA while the 50-day is at 7.1520. On the downside, post FOMC Wednesday lows rested at 7.0851.
- CNH outperformed yen losses (down 0.68% versus the USD), while EUR/USD fell a more modest 0.21%. CNH/JPY is above 20.81 and not too far from Sep highs, while EUR/CNH is back under 8.3800.
- Today on the data front we have Aug FX settlement data, which will provide an update on conversion/capital flow trends.
- From overnight: Wires reporting that a call between President Donald Trump and Chinese President Xi Jinping will take place at 09:00 ET 14:00 BST on Friday, Sept. 19. The call is expected to formalise an agreement to keep the video-sharing app TikTok operational in the US by transferring the app to majority US ownership.
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AUSSIE 3-YEAR TECHS: (U5) Holding Bulk of Rally
- 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.
CNH: USD/CNH Implied Vols Continue To Decline, LPRs Seen Steady Today
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
NEW ZEALAND: Whole Milk Prices Edge Higher At Latest Auction
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
