CNH: USD/CNY Fixing Under 7.1400, Error Term Stays Negative

The USD/CNY fix printed at 7.1656, versus a Bloomberg market consensus of 7.1627.

• Today's fixing marginally down on yesterday's. The fixing error was slightly tighter at +29pips (versus -238pips yesterday).
• USD/CNH is up at 7.1725 post the fixing, with softer USD trends elsewhere in the region likely helping. The pair remains within recent ranges though. Downside focus is likely to rest sub 7.1700, which has marked recent lows.

• CHINA SETS YUAN CENTRAL PARITY AT 7.1656 TUES VS 7.1710

The BBDXY range overnight was 1207.87 - 1218.30, Asia is currently trading around 1205. The BBDXY has extended lower again in early Asian trading after President Trump's announcement of a ceasefire, BBDXY -0.20%. The price action overnight was very revealing and points to a market that is very quick to reinstate USD shorts with conviction high for a move lower.

• Bloomberg -  "As fears of a broader conflict fade and risk appetite improves, the greenback appears set to return to its vulnerable state. Meanwhile, focus returned to the Federal Reserve after Governor Michelle Bowman signaled Monday that she could support a rate cut as early as July, should inflation continue to ease”
• Jim Bianco on X: “The result of today's missile attack against a US base in Qatar has oil plunging and the fear of Iran closing the Strait of Hormuz collapsing. Markets are concluding that Iran is incapable of closing the Strait, and are reacting in kind.”
• The BBDXY failed miserably towards the 1220 area overnight, market is again eyeing the pivotal 1200 area this morning. All this with what is perceived to be an already extreme short market.
• The USD should continue to be met with supply towards the 1225/30 area, only a sustained break above here would start to get the bears worried. 
• There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way. 
• Data/Events : S&P Global US PMI’s, Existing Home Sales

Fig 1: BBDXY Daily Chart

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