CNH: USD/CNH Rebounds Back Above 7.1000 Post Fed, Equities Outperforming

Spot USD/CNH tracks near 7.1870 in early Tuesday dealings, after posting little net change for Monday's session. Broader USD sentiment was firmer, with the DXY up 0.30%, while the BBDXY gained 0.20%. The USD was initially assisted by softer sentiment for major equity benchmarks, and US yields turning higher across the US Monday session then provided further support. Spot USD/CNY ended Monday trade at 7.1849, while the CNY CFETS basket tracker edged down by 0.10% to 96.07. The index remains within recent ranges. 

• For spot USD/CNH, little has changed from a technical standpoint. Current levels are very close to the 20 and 50-day EMA levels. The 200-day EMA resistance point is around 7.2175, while renewed downside in the pair is likely to see 7.1681, the August low, eyed.
• China equities have outperformed global equity trends in recent sessions, but the China to global equity ratio is still just under late July highs. BBG noted firm inflows China ETFs. "China recorded the biggest inflow across emerging-markets in the week — $623.8 million — led by iShares MSCI China. That ETF alone, known by the ticker MCHI, accounted for $215 million of the investment." The CSI 300 closed just short of Oct 2024 highs yesterday.
• The rotation out of bonds and into equities is helping. Bond yields were firmer across the board yesterday, with the 10yr up above 1.78%, fresh highs back to early April. Still, US-CH government bond yield differentials sit within recent ranges, the 10yr spread around +255bps.
• We still await July FDI figures, while loan prime rate outcomes are due tomorrow. No change is expected. 

• 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: 96.590 @ 16:16 BST Aug 18
• 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.

Source: Bloomberg Finance L.P./MNI