CNH: USD/CNY Fixing Edges Higher, Error Term Widens

The Equity market correction accelerated lower on Friday in response to the NFP data and the implications it has for growth going forward. This morning has seen US futures open a little higher, pulling back a little from Friday’s lows, ESU5 +0.25%, NQU5 +0.30%. The AUD traded heavy in the crosses on Friday, particularly against the JPY and the EUR. Should we see a deeper correction lower in risk I suspect the AUD will continue to underperform.

• EUR/AUD - Friday night range 1.7745 - 1.7931, Asia is currently trading around 1.7840. The pair found decent demand around the 1.7700 area and bounced nicely from there, negating the potential correction that seemed possible. It is still in the middle of its 1.7500 - 1.8000 range, but should risk follow through with its correction lower I suspect we could then see another test of the 1.8000 area.
• GBP/AUD - Friday night range 2.0454 - 2.0551, Asia is trading around 2.0490. The pair continues to chop around just above its 2.0450 support area. The pair has found demand towards the lower end of its 2.0450 - 2.1050 range; and with risk looking vulnerable this probably offers a good/risk reward to play from the long side looking for a move abc to 2.07/08.
• AUD/JPY - Friday night range 95.11 - 96.91, Asia is trading around 95.600. The pair failed on multiple attempts above 97.00 and has moved swiftly back to test its first support around the 95.50 area. With risk having a huge reversal lower last week the headwinds for JPY crosses are growing and should risk remain under pressure I suspect bounces will initially be met with supply . 
• AUD/NZD -  Friday night range 1.0924 - 1.0965, the cross is dealing in Asia around 1.0955. The Cross continues to trade sideways as the pair tries to build some momentum to move higher.

Fig 1: AUD/JPY spot 120min Chart

Source: MNI - Market News/Bloomberg Finance L.P

• CHINA PBOC CONDUCTS CNY544.8 BLN VIA 7-DAY REVERSE REPO MON

The USD/CNH fix printed at 7.1395, versus a Bloomberg market consensus of 7.1746.

• The fix dropped sharply, in line with softer USD levels, while the fixing error also narrowed to -351pips, from -558pips on Friday. Recent lows in the fix rest at 7.1385 (recorded on July 24).  
• USD/CNH is slightly lower in the first part of Monday dealings, but has been unable to sustain breaks sub 7.1900 so far.