CNH: USD/CNH Maintaining Uptrend As Onshore Markets Return
Onshore China markets return today after the National Day break (after being out since last Wednesday). Spot USD/CNH tracks near 7.1490 in early Thursday dealings, maintaining a modest uptrend that has been in place since mid Sep. We are just above 50-day EMA resistance, while the 100-day point is close to 7.1670. The 20-day EMA support point is close to 7.1360/65, while late Sep lows, near 7.1190, might need to be tested to challenge near term thinking around dips being supported in the pair.
- The USD BBDXY index is up around 0.90% since China markets went off. Spot USD/CNY finished up at 7.1224 last Tuesday. Focus will be on the USD/CNY fixing in light of the dollar rebound. This bias is likely to be for the yuan to exhibit a low beta with respect to these USD gains. USD/CNH is only up around 0.30% over this period.
- CNH/JPY made fresh highs of 21.39 on Wednesday, but sits back at 21.3480 in latest dealings, consolidating its recent break above 21.00. Yen remains on the backfoot amid onshore political uncertainty, as well as better risk on tones.
- Anecdotes around China spending during the recent holiday period were mixed, via BBG from late yesterday: "Sales at key retailers and restaurants grew just 3.3% during the first four days of the holiday, according to the Commerce Ministry, nearly half the growth pace seen during the Labor Day break in May."
- The local data calendar has Sep new loans/aggregate finance due from the 9th to 15th of Oct. Next week we get trade figures on Monday, followed by inflation data on Wednesday (both for Sep).
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CNH: USD/CNH Eyeing Test Sub 7.1200, US-CH Yield Differentials Lower
USD/CNH tracked lower post the Asia close on Monday, as broader USD sentiment faltered. CNH gained a modest 0.06% for Monday's session, with the DXY and BBDXY indices both down around 0.30%. The dollar was weighed as US Treasuries finished moderately higher after a flat open Monday, back near Friday's post NFP highs, stocks gaining as well as rate cut pricing into year end gathers momentum. USD/CNH tracks near 7.1225/30 in early Tuesday dealings, just up from post NFP lows from Friday near 7.1220.
- Spot USD/CNY finished up on Monday at 7.1298, while the CNY CFETS basket tracker eased by 0.12% to 96.65, per BBG.
- For USD/CNH technicals, focus will remain on recent lows at 7.1159 from late August. A clean break sub this level could see sub 7.1000 targeted. On the topside the 50-day EMA resistance point is trending lower, now around 7.1670.
- US-CH yield differentials have broken to fresh lows back to Sep 2024 for the 2yr differential. The 10yr spread is back to levels last seen in Dec 2024, see the chart below. This is pointing to further downside risks in USD/CNH, particularly in terms of 2yr spreads.
- On the equity side, onshore markets lagged broader regional gains on Monday, but the Golden Dragon index rose 2.12% in Monday US trade (the index is at highs back to March).
- The local data calendar has August new loans/aggregate finance figures due (from today until 15th Sep), while tomorrow, Aug inflation is out.
Fig 1: USD/CNH Versus US-CH Government Bond Yield Differentials
Source: Bloomberg Finance L.P./MNI
AUSSIE 3-YEAR TECHS: (U5) Bounces Further Off Support
- 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 @ 16:00 BST Sep 8
- SUP 1: 96.430/95.900 - Low Sep 3 / 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 are trading further off the lows. A resumption of gains from here would further narrow 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 threat. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would open 96.860, the Apr 7 high.
ASIA: Coming Up In Asia Pac Markets On Tuesday
| 2345BST | 0645HKT | 0845AEST | New Zealand Q2 Manufacturing Activity |
| 0001BST | 0701HKT | 0901AEST | UK Aug BRC Sales Y/Y |
| 0050BST | 0750HKT | 0950AEST | Japan Aug Money Stock |
| 0130BST | 0830HKT | 1030AEST | Australia Westpac Sep Consumer Confidence |
| 0230BST | 0930HKT | 1130AEST | Australia NAB Aug Business Confidence |
| 0335BST | 1035HKT | 1235AEST | New Zealand Bill Sale |
| 0430BST | 1130HKT | 1330AEST | Japan 6 mth Bill sale |
| 0700BST | 1400HKT | 1600AEST | Japan Aug P Machine Tool Orders |
Source: Bloomberg Finance L.P./MNI
