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USD/CNH: The fixation is normalizing – OCBS

USD/CNH briefly traded above 7.31 before turning lower towards the close of the week, note OCBC FX analysts Frances Cheung and Christopher Wong.

The pair moves lower following the general USD pullback

“The move lower followed the broader pullback in the US Dollar (USD) as the daily fix reversed to +5 pips/day last week (vs. +15 pips/day during June 19-28). Today’s fix was -3 pips at 7.1286 (vs. 7.1289 on Friday).”

“That said, recent USD/CNY fixings continued to follow a pattern that reinforces our view that the authorities are pursuing a measured pace of RMB depreciation, in an attempt to relieve some depreciation pressure. We believe the intention is not to pursue a heavy-hitting approach so as not to undermine sentiments (for fear of accelerating capital outflows) – we continue to monitor.”

“But overall, a higher USD/CNY fixation, a wider CNH-CNY spread, and concerns over an escalation in US-China trade tensions may imply some concerns for the RMB on the immediate horizon. USDCNH was last at 7.2867. Mild bullish momentum on the daily chart moderated but the decline in the RSI softened. Risks in both directions. Resistance at 7.31, 7.3440 (previous high in October 2023). Support at 7.28, 7.2770 (21 DMA), and 7.26 (50 DMA).”

Source: Fx Street

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