CNH: USD/CNH Near 7.2300, Trump Won't Lower Tariffs To Kick Start Trade Talks
USD/CNH tracks just under 7.2300 in early Thursday dealings. The pair was supported sub 7.2200 post Wednesday's Asia close, but had reasonably tight ranges overall as the US session unfolded. The USD was supported as the FOMC held rates steady, with Fed Chair Powell in no hurry to ease rates. The USD BBDXY index finished up +0.52%. Spot USD/CNY ended Wednesday trade at 7.2275, leaving little basis with USD/CNH. The CNY CFETS basket tracker was little changed, last just under 96.00 (per BBG).
- For USD/CNH technicals, we have been unable to sustain tests sub 7.2000 so far in May. Recent lows coming in at 7.1845 will be targeted on any fresh downside momentum. We are still sub all key EMAs, with the 200-day the nearest at 7.2515/20.
- US President Trump stated on Wednesday (US time) that he wasn't willing to lower tariff levels in a bid to help US-China trade negotiations (see this BBG link). This comes ahead of weekend talks in Switzerland between senior China and US officials.
- Our own China policy team noted that the talks this weekend are more likely to be an ice breaker rather than making strong progress (see this link).
- In the cross asset space, onshore equities climbed yesterday post the easing moves from the authorities and efforts to support the economy. In US trade, the Golden Dragon index lost 2.34% though.
- The data calendar is empty until tomorrow's trade figures print. Late yesterday FX reserves for April rose to $3.282trln, up over $40bn from the March level.
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NZD: The Flightless Bird?
A day of extreme volatility with liquidity seeming to dry up. Once the dust settles though the NZD is still hovering just above its pivotal 0.5500 Support and continues to trade heavy.
- Yesterday's range was 0.5507 - 0.5626, Asia opened near the lows around 0.5540.
- The RBNZ is expected to lower its key rate to 3.5% tomorrow. The market is starting to think they might need to do more as trade tensions threaten the economy.
- NZ announced it would be lifting defense spending to 2% of GDP over 8 years.
- The NZD initially found some support yesterday as Chinese policy makers discussed ways to combat the tariffs and considered moving forward some measures that had been discussed. This increases the potential of China fast tracking both monetary and fiscal stimulus.
- Technically the NZD continues to hold the 0.5500 support area, but price continues to trade heavy just above it..
- The CFTC data shows both leverage funds and asset managers are running historically large short positions, if risk continues to melt down, expect these to be added to.
- On the day expect sellers to participate in any bounce back towards 0.5650/0.5700. All eyes though will be watching the key 0.5500 area for signs it might give way..
- RBNZ rate decision on Wednesday.
NZDUSD
Source: MNI - Market News/Bloomberg
AUSSIE 3-YEAR TECHS: (M5) Rips to New 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: 96.580 @ 16:36 GMT Apr 07
- 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 ripped to new contract highs again to begin the week - clearing 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.
USDCAD TECHS: Corrective Bounce
- RES 4: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 3: 1.4415 High Apr 1
- RES 2: 1.4304 50-day EMA
- RES 1: 1.4296 Intraday high
- PRICE: 1.4225 @ 16:58 BST Apr 7
- SUP 1: 1.4028 Low Apr 3
- SUP 2: 1.3986 Low Dec 2 ‘24
- SUP 3: 1.3944 61.8% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD has recovered from last week’s low. For now, the move higher appears corrective. The sell-off last week confirmed a clear reversal of the bull cycle between Sep 25 ‘24 and Feb 3. Price has traded through a key support at 1.4151, the Feb 14 low, and this signals scope for an extension towards 1.3944, a Fibonacci retracement. On the upside, key short-term resistance is seen at 1.4304, the 50-day EMA.
