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USDCNH

How China’s zero-COVID policy is taking a toll on its economyThe more contagious omicron strain of COVID-19 is testing China’s zero-tolerance COVID-19 policy and while many signs underscore the strategy’s adverse impact on the country’s economic recovery, Beijing continues to stick to it, dismissing suggestions that China should learn to live with the virus as other nations do. Lockdowns in Shenzhen and Shanghai The resurgence of COVID-19 cases in Shenzhen, dubbed as China’s Silicon Valley, prompted authorities to impose a week-long lockdown of its 17.5 million residents in March. The curbs forced the closure of some factories including those of Apple (NASDAQ:AAPL) supplier Foxconn (TW:2317) and carmakers Toyota Motor (NYSE:TM) and Volkswagen (FRA:VOW). Shenzhen is also home to tech giants including Tencent (HKG:0700) and Huawei Technologies. While JP Morgan analysts do not expect the Shenzhen lockdown to have a big impact on iPhone production, some economists have delivered a grim warning on the lockdown in Shanghai. Authorities in China’s financial hub last week extended the lockdown of 26 million people as the city launched its largest public health response in the COVID-19 pandemic era. ING Bank’s Greater China chief economist Iris Pang warned that the cost of the lockdown in Shanghai and in other areas in China will have a “huge” cost to the country’s growth. Shanghai is tipped to suffer a 6% GDP loss if the lockdown persists in April, leading to a 2% GDP loss for the whole of China. The lockdown in Shanghai also affected the production of some known brands including Tesla (NASDAQ:TSLA), German auto parts giant Bosch, and Taiwan’s Pegatron (TW:4938), another iPhone assembler. Offshore Yuan and China H-shares After trending downward for the previous 7 months, news of the extreme lockdowns prompted the USDCNH to break upwards and out of its channel. The USDCNH, at this point, doesn’t have a clear path back to its previous territory. Conversely, the China H-shares index saw a reversal of fortune on March 16. The China H-shares index follows Chinese incorporated companies which are traded on exchanges outside the country. The boost may have come from investors realising that China would be unlikely to face sanction from the US after failing to condemn the Russian invasion of Ukraine more forcibly in the beginning. GDP slowdown The latest developments in China are widely expected to take a toll on the economy that is already battered by the slowdown in the real estate sector and other downward risks. Everbright Securities recently warned that Beijing’s move to cling to its zero-COVID strategy could knock 10 percentage points out of China’s GDP on a quarterly basis in the first quarter. Natixis, meanwhile, expects the lockdowns and transport restrictions to slash 1.8 percentage points from China’s first-quarter GDP. Julian Evans-Pritchard, senior China economist at Capital Economics, in late March warned that "the economy is in the midst of its most abrupt downturn since early 2020.” China is set to release its quarterly GDP data on Monday, April 18.
by BlackBull_Markets
Trader thoughts - The USD back in beast mode For now, the USD reigns supreme – the trade-weighted USD sits at the highest levels since May 2020, as does the USDX, although this USD basket is heavily skewed towards the EUR. However, the bullish move in the USD sits firmly on momentum trader’s radar, while Pepperstone clients are skewed short suggesting they are seeing mean reversion as the base case. The USDX is up for six consecutive days, and while it is statistically rare to see seven straight days of gains, we question if the USD basket can break above 100 soon? Looking back over the past 5 sessions and we see EURUSD -1.6% - the worst performing pair in G10 FX – predominantly driven by relative bond yield differentials in favour of USDs, we also watch for Sunday’s first-round French presidential election – with the polls becoming closer for the second round (24 April) and in favour of Marine Le Pen, there seems there are some who are hedging risks here with short EUR and FRA40 index positions. The USDX has naturally benefited from the recent EUR weakness, where technically the break of the double bottom neckline targets 101.30, with 100.54 also near-term resistance. 100 is a psychological barrier and we’ll need to see EURUSD into 1.0800 for that to play out and the way EURUSD is trending it seems the likely course of action. Looking at the fundamental backdrop - the world is long of USDs, which is having some handbrake on its ability to really get going, but there are still many attractions of owning it. Firstly, it’s going up and that’s a great start – buy strong, sell weak is a prudent way to skew the odds someway to your favour. The US has the highest CPI inflation rate in the G10 FX region, and next week we should see this even higher with the market looking for a 50bp increase in the year-on-year print to get to 8.4% - if this print does come to pass it just reinforces the need for the Fed to step it right up and hike by 50bp in May and start its process of reducing its balance sheet and reserves. We can look at forward rates and see that hedge and pension funds and corporate Treasury divisions can obtain relative higher carry from US rates, and only NZ has a higher 2-year bond yield. We can see US real Treasury rates are now -19bp, and not far off turning positive, which is impressive considering they were -110bp in early March If US real rates turn positive, then it could act as a sizeable headwind for equity returns, which again if we see a renewed drawdown in the S&P500 may feedback into USD appreciation, with the USD retaining its safe-haven status.US growth is in relatively good shape, although we are watching consumer confidence closely – certainly, the labour market is in fine form and the household savings rate is still high enough to absorb high inflation. I do think USDCNH is well worth watching – like other FX pairs, client interest in this cross is driven by trending conditions, the rate of change and general volatility. A trend would have big implications for broad FX markets, and I do sit in the camp that if we see a higher USDCNH, notably if we see a break of 6.4100, then this will flow into further USD strength vs G10 FX. Whilst fundamentals don’t tend to influence the yuan as much as major currencies, there does seem to be growing downside risk for the yuan – a weaker current surplus, inflation running at a low 0.9%, the yield advantage in Chinese bonds diminishing vs US and growth called into question over its Covid-zero stance. I like the cross higher, which as I say should feed into broad USD appreciation – that said, near-term we watch to see if US bond yields keep moving higher, with eyes on US CPI, and equity volatility. The French presidential election and the ECB meeting also pose risks To me, the balance of risk is skewed to a higher USD, but there may be some wood to chop to get through 100.
PEPPERSTONE:USDXLong
by Pepperstone
Hawks vs Doves, the battle of CNH…CNH1! Birds of different feathers are likely not to flock together! As policy divergence continues between the US Fed (Hawkish) vs the PBoC (Dovish), we expect the Dollar to strengthen against the RMB on a macro level. On the technical side, we see a bullish RSI divergence (prices making lower lows while RSI making higher lows), suggesting that momentum is nearing the end and potentially reversing. We also note proximity to the long-term support level since 2014 as an additional bullish factor. Entry at 6.355, stop at 6.2955. Targets are 6.580 and 6.720. Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
CME:CNH1!Long
by inspirante
13
USDCNH 17th MARCH 202213 Chinese cities have been in total lockdown since Tuesday, and several others have been in partial lockdown. The Chinese government reported that there were around 15,000 confirmed cases of Covid-19 nationwide in March. Chinese health officials have urged people over 60 to get vaccinated - including a third booster ASAP. Technically we can see the limits of support and resistance trendline. it will be a bullish spike when the resistance line breaks. this is my trading plan for USDCNH, are you also waiting for a breakout on this pair?
Long
by DNP-FX
Currency crisis is here. Which currencies are the best/worst?In this current environment it is very clear that some countries will be able to tackle this crisis a lot better than others, and therefore their currencies could perform a lot better. We'll start with developed market currencies and then move to emerging market currencies. Won't show charts on each currency, but will try to show the best and simply mention some others to keep an eye on. The currencies that are suffering the most at the moment are the ones in Europe, especially the ones with close relations to Russia, while the ones performing the best are the ones that produce a lot of commodities and have little to no dependency on Russia. When looking at the Euro, we can see that it was already struggling. Europe has been in terrible situation with some of the lowest growth rates across the entire world. Too much debt, too many political issues, bad demographics and now a huge crisis (energy + food + military). Even though EURUSD is getting oversold and is at support, it doesn't look good. The structure is pretty bearish and it looks like this time around it will break parity. In the short term it might bounce here, however based on several indicators it looks like the largest bounce will probably come around 0.99-1.02. At that point it would get so oversold, while it's the perfect place for late shorts to be squeeze and therefore a good place to close shorts and potentially open a small long. The pound is looking somewhat stronger and it has been performing a lot better than the euro since Mar 2020. It has now pretty recovered most of its lost ground since the Brexit and Britain's strength has increased by leaving the sinking ship of Europe. However it is also heavily affected by all the issues in Europe and so GBPUSD probably has lower to go. The strongest developed market currencies at the moment seem to be the Australian Dollar and the Japanese Yen, with the AUD looking much stronger. The reason is that Australia is really far away from all these conflicts, it has a lot of commodities (hence it benefits from inflation) and is pretty much self sufficient in a lot of ways. Japan is much closer to Russia both in terms of borders, but also in terms of trade & finances, so it is affected more. JPY's strength comes from the fact that it was already pretty oversold and because the YEN is usually seen as a safe heaven. Now when looking at emerging market currencies, the strongest is the CNH. It has been strengthening vs the USD for a while, and as China has taken a different stance towards Russia compared to the US, it might benefit the most financially. China has changed a lot in terms of its economy and it is trying to dedollarize, while also becoming more self sufficient and having closer ties to Russia. There is no way it won't be affected by all of this, but in the long run it could be one of the biggest winners. The digital Yuan could be big in an era where the USD has been weaponized, and the USD might have to be debased a lot more as the US isn't as self sufficient as China is. Currency wars begun a lot time ago, but now they are intensifying. China benefits from a weak dollar as a lot of its companies have USD denominated debt, but the state of its economy is unknown and I am definitely not indicating that they will be the clear winners out of all of this. Just that the CNH might perform better than the USD and pretty much most other currencies out there. The South African Rand doesn't look all that strong, but it looks stronger than the MXN and the INR which look pretty weak. The one that has been looking surprisingly strong is the BRL, which however could be in a major distribution phase and could be ready to have another leg down. The worst EM currencies clearly are the Turkish Lira and the Russian Ruble. The TRY started going down a long time ago due to all the crazy policies taken by the government and the Central bank, but mainly due to the fact that the government has borrowed a lot of the USD Turkish people had in their bank accounts. If inflation gets worse in Turkey, then this could force the Gov + CB to turn the USD deposits into TRY, something that could send the Lira in a death spiral. The RUB seems to be in a similar direction as all the sanctions on Russia, as well as all the restrictions from within Russia could really destroy the currency. Since the 2008 crisis & the 2014 Crimea crisis up until Jan 2020, the RUB had lost more than 60-70% of its value. Since then it lost another 50% and most of its losses occurred over the last 2 weeks. We could easily see the RUB go down another 50% as the 'West' has declared a 'financial war' on Russia. Just the USDRUB breakout is an indication that there is probably a long way to go. Going long on the RUB would only make sense if interest rates are so high, while the total RUB supply is close to being equal to the value of the gold reserves the Russian Central Bank holds. In conclusion the best basket of currencies to hold are the USD, AUD, JPY & CNH, while being short small European currencies, as well as the EUR, TRY, RUB & INR. All fiat currencies will get devalued and most of the fiat currency + bond holders will get the most damage. Those who will probably benefit the most are those being long commodities and hard assets broadly. More ideas coming soon on the commodities, crypto and stocks!
by BitcoinMacro
USDCNH Long Term TradeFundamental Insight We all know that U.S. in tightening cycle now, and half of the world will follow soon, but only China did the rate cut. On January 5, Premier Li said the government should implement “new and greater combined tax and fee cuts ensure a stable start for the economy in Q1 stabilize the macroeconomy.” On December 27, the MoF reiterated that it would “strengthen the coordination and linkage of fiscal and monetary, employment, and other policies” and added that the government will “give play to the role of fiscal policy to stabilize investment and promote consumption.” The PBoC recently added a new call to “take more proactive measures to boost support for the real economy” and “better stabilize the aggregate credit growth” as well as “bring down the overall financing costs for businesses.”
Long
by TradingCocktail
Is the Chinese Yuan Readying to Reverse?The Chinese Yuan spent most of 2021 appreciating against the US Dollar despite a broadly upbeat year for the latter. Now, fundamentals may be paving the way for its turnaround amid the risk of slowing demand for Chinese exports - www.dailyfx.com USD/CNH recently turned higher following a more hawkish Federal Reserve, reinforcing the key 6.3526 - 6.3238 support zone. Meanwhile, the PBOC is looking comparatively dovish. Positive RSI divergence shows that downside momentum is fading, which can at times precede a turn higher. Immediate resistance appears to be the 61.8% Fibonacci extension at 6.3833 before the midpoint at 6.4110. Down the road, the pair would have to face falling resistance from March which could reinstate the broader downside focus. On the other hand, taking out the key support zone exposes the 100% extension at 6.2936.
by QM_Dubrovsky
1
A Big Turning Point for USDCNHin the past few years, USDCNH usually found a turning point in the 1st Q, especially around the Chinese New Year. Today there is a big rally in USDCNH. Reuters report, FX conversion before the week-long Lunar New Year holiday, which starts on Jan. 31, has been traditionally heavier as exporters need to settle their dollar receipts for goods payments and employee bonuses, but markets widely expect some weakness could kick in soon. www.reuters.com Fed signal a rate hike in March and PBoC is going to keep monetary policy neutral to slightly loose, this will narrow the rate spread of these two currencies and favor more dollar strengthening. China's GDP will still have pressure this year as the Q4 GDP slowed to 4% in Q4 2021. The 20th National Congress of the Communist Party of China will be held in the second half of this year likely in Oct or Nov, the Chinese government will be busy with political issues. Will, there be any further pressure on the economy, we need to wait and see. a surge in USDCNH on 27 Jan 2022, should show a bottom of this pairs of currency and head for 6.5-6.65 in coming months.
Long
by bruceyam
What 3 Events Will Traders Be Watching This Week? 17 Jan – 21 JaWhat 3 Events Will Traders Be Watching This Week? 17 Jan – 21 Jan, 2022 Monday, January 17: YoY China Retail Sales Dec Year over year Retail Sales in China is predicted to slow in December 2021’s reading from 3.9% to 3.7%. The Offshore Yuan has eyed a sub-6.34000 value against the USD since December 2021 but hasn’t held the nerve to stay this low for anything more than a brief intraday flirtation. The USDCNH is currently on the precipice of this level, trading at 6.35283 and could finally close sub-6.34000 in a daily time frame if an unexpectedly strong December Retail Sales report helps dispel rumblings of a weakening Chinese economy. Tuesday, January 18: BoJ’s Press Conference The Bank of Japan’s (BoJ) Governor Haruhiko Kuroda will speak on Tuesday Evening. No significant changes to the Bank’s ultra-loose monetary policy are expected, but traders will watch for signals concerning future rate hike decisions. The market may have already begun anticipating such, with Japanese Yields hitting a six-year high last week, and with it, the Japanese Yen experienced its best weekly gain in six months. Wednesday, January 19 to Friday, January 21: Wednesday: YoY UK Inflation Rate Dec Thursday: Canadian YoY Inflation Rate DEC Friday: Japanese YoY Inflation Rate DEC The market will be reacting to three important inflation data reports In quick succession for the last three days of the week. A 0.1 percentage point increase is expected for all three reports. Perhaps the most important to watch will be Friday’s report from Japan as it can be considered in tandem with the BoJ Monetary Policy Minutes report, which is released twenty minutes after the inflation report.
by BlackBull_Markets
USDCNH | Perspective for the new week | Follow-up detailsWe witnessed a 1,000pips run in our direction since my last publication on this pair (see link below for reference purpose) and the confirmation of reversal set-up at the Breakout of Neckline (CNY 6.39500) during last week trading session is the final straw that broke the camel's back for me. Higher US bond yields and hawkish Fed expectations shine the light of hope on the Greenback and we could witness a continued bullish momentum as investors brace for the Fed's meeting next week. Tendency: Uptrend (Bullish) Structure: Breakout | Supply & Demand | Reversal pattern (Double Bottom) Observation: i. It has been a mix of Bearish momentum for the USD since the beginning of this year. ii. Finding a bottom twice at CNY6.36800 within the month of October 2021 - this level in recent time sharing memory for Demand (May 2021) could be an opportunity to take advantage of a short term rally. iii. Double Bottom: The appearance of an extremely bullish technical reversal pattern describing a change in trend and a momentum reversal from prior leading price action may not be a coincidence. iv. And since testing the demand zone the second time, the price continued to find higher highs that culminated in a Breakout of Neckline @ CNY6.39500 on Friday to signify the potential direction majority might be heading in the coming week. v. With this development in place, it will be appropriate that we take advantage of this potential rally at the retest of Neckline. vi. The early hours/days of the new week might witness a further plunge in price to test the Neckline @ CNY6.39500 or below to incite Trend continuation. vii. Hence, above the Neckline remains a comfortable level to take a long position on this pair. NB: Please note that the narrative so far supports a temporary bullish momentum and this is so after putting into consideration the long term downtrend perspective... Trade consciously!😊 Trading plan: BUY confirmation with a minimum potential profit of 300 pips. Risk/Reward : 1:4 Potential Duration: 2 to 7days NB: This speculation might be considered to make individual decisions on the lower timeframe. Watch this space for updates as price action is been monitored. Risk Disclaimer: Margin trading in the foreign exchange market (including commodity trading, CFDs, stocks etc.) has a high risk and is not suitable for all investors. The content of this speculation (including all data) is organized and published by me for the sole purpose of education and assistance in making independent investment decisions. All information herein is for your reference only and I take no responsibility. You are hereby advised to carefully consider your investment experience, financial situation, investment objective, risk tolerance level, and consult your independent financial adviser as to the suitability of your situation prior to making any investment. I do not guarantee its accuracy and is not liable for any loss or damage which may result directly or indirectly from such content or the receipt of any instruction or notification therewith. Past performance is not necessarily indicative of future results.
Long
by darcsherry