CNH: USD/CNH Eyeing Break Sub 7.1700 Amid USD Weakness, Lags EUR Gains
USD/CNH tracks close to 7.1730 in early Friday dealings, after the pair tracked lower for most of Thursday's session. CNH rose 0.35% for the session, with an on-going negative USD backdrop (DXY down 0.80%, BBDXY off around 0.60%) providing support for the currency. Spot USD/CNY finished up at 7.1727, while the CNY CFETS basket tracker lost a little ground to 95.70 (per BBG), which is still close to recent cycle lows for the index.
- For USD/CNH spot, downside focus will be on earlier June lows at 7.1645, while YTD lows rest at 7.1616 from May. The Nov 7 low from last year was close to 7.1400, while earlier Nov lows last year tested sub 7.1000, in terms of potential downside targets in the pair. We may continue to see the 20-day EMA region present an upside cap for the pair (now close to 7.1940).
- CNH continues to display a low beta with respect to USD weakness (further soft data outcomes weighed on the USD for Thursday US trade), although more so versus the EU currency bloc. EUR/CNH got to highs of 8.3454 overnight, fresh highs since April (now back closer to 8.31). CNH/JPY is near 20.00, so within recent ranges.
- The Golden Dragon index lost 0.41% in Thursday US trade, just the second daily drop since June began. China onshore markets were close to flat on Thursday, but the HSI lost 1.36% in Hong Kong. US President Trump stated "he will “probably” save ByteDance Ltd.-owned TikTok" (via BBG).
- The local data calendar sees new loans/aggregate finance due between now and June 15.
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US: Trump Approval Rating Rises, Less Concern About Recession, Per Rtrs Poll
Reuters reports in an opinion poll that Trump's approval rating has risen, while Americans are also less concerned about recession risks (albei still remaining at an elevated level).
- Reuters noted: "The two-day poll showed 44% of respondents approved of the Republican leader's performance, up from 42% in a prior Reuters/Ipsos survey carried out April 25-27." "Approval of Trump's economic stewardship rose to 39% from 36%".
- On recession concerns, Reuters noted: "Some 69% of respondents in the new poll said they were concerned about a recession, down from 76% in a Reuters/Ipsos poll conducted April 16-21."
- These results follow the recent recovery in US equity market sentiment, with bourses up strongly from recent lows. Tariff delays, coupled with hopes of a US-China trade deal at some stage over the next few months, have been key factors around the equity bounce and reduced recession odds.
CNH: CNH Lags USD Sell-off After Touching YTD Highs
USD/CNH spent most of the post Asia close period on Tuesday firming, although we found selling interest above 7.2000. We track just under this level in early Wednesday dealings, after little change in aggregate for Tuesday's session. The CNH lagged broader USD index softness, which was weighed post the softer than expected US CPI print. The BBDXY index lost 0.70%. Spot USD/CNY finished up just under 7.2050, while the CNY CFETS basket tracker ended Tuesday at 97.24, up strongly from recent lows (per BBG).
- For USD/CNH technicals, resumed downside momentum could see lows from yesterday (7.1789) re-tested. These levels were fresh YTD lows, which further south is a likely look at the 7.1400-7.1600 region. On the topside, upside focus will rest on the 200-day EMA near 7.2500, which marked recent highs.
- The CNH saw little benefit from broader USD softness, which was aided by the US CPI miss. US equities continued to rise, led by the tech side (Nasdaq up by 1.61%). In contrast the Golden Dragon index was around flat in Tuesday US trade.
- Tuesday's session looked more like a traditional one from an FX risk standpoint, with higher beta currencies outperforming the likes of JPY. This may have kept CNH interest somewhat sidelined, along with less equity upside compared to US markets as an additional headwind.
- Sell side names, like Goldman Sachs and J.P. Morgan have nudged up their China GDP growth forecasts, with an improved trade outlook cited (per BBG).
- Locally, we await the Apr new loans/aggregate finance figures, which are due by tomorrow, but could print today (May 15).
AUSSIE 3-YEAR TECHS: (M5) Within Range of Highs
- 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: 96.390 @ 16:33 BST May 13
- 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 continue to circle just below recent contract highs, having cleared resistance on the continuation contract. The rally has taken out resistance at 96.730, the Sep 17 ‘24 high. On the downside, any reversal lower from current levels would signal a resumption of a downtrend. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low.
