CNH: USD/CNY Fixing Lower Again, Error Term Remains Positive

• CHINA SETS YUAN CENTRAL PARITY AT 7.0833 WEDS VS 7.0866

• Treasuries were closed overnight in the US for Veterans day and with no lead in for futures, the open was slow.  However once cash opened, a strong rally ensued with yields 3-4.5bps lower across the curve, with the 7-Yr the outperformer, down -4.4bps in early trade.  
• The rally is after employment figures from ADP Research signaled US companies shed 11,250 jobs per week on average in the four weeks ended Oct. 25, spurring the idea of a December cut being back on.
• Futures are modestly down with the US 10-yr down -03 to 112-30+, atop the 20-day EMA.  If it trends below, the 50-day EMA below is at 112-26+.

• The 2-Yr is at 3.56% (-3.3bps)
• The 5-Yr is at 3.672% (-4.3bps)
• The 10-yr is at 4.081% (-3.7bps)
• The 30-Yr is at 4.679% (-2.7bps)

Next up tonight is the US$42bn 10-Yr issuance as the next guide for market demand, with markets remaining fixated on the US shutdown outcome. 

The overnight range was 21.5902 - 21.6816, Asia is currently trading around 21.6600.  The pair continues to find demand on dips and while the 21.30-21.40 support area holds I suspect this will carry on. With risk building on its recent gains and Japanese Policy keeping the JPY under pressure it is looking to test the 21.70/75 resistance area. A break above here would turn the focus back toward the highs of 2024 seen around the 22.20 area.

Fig 1 : CNH/JPY Daily Chart

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