USD/CNY: Marginal upward pressure? - Westpac

Frances Cheung, Research Analyst at Westpac, points out that recently USD/CNY rebounded mildly since its retracement to around the 6.92 handle, with the recent high of 6.9771 the next resistance and the 50DMA of 6.8984 the support.

Key Quotes

“China October yuan loan and aggregate financing data were weak, despite the authorities’ effort to incentivize banks to extend loans to private enterprises.  More targeted easing is likely to come, which may add marginal upward pressure on USD/CNY.”

“Meanwhile, more complete data showed there were net bond outflows from the onshore interbank market in October, the first since Feb 2017. We tend to remain cautious towards the development on US-China relation despite some positive headlines.”

“Nevertheless, PBoC Q3 monetary report underlines the central bank’s intention to stabilize the RMB. In the policy outlook section, it removed the phrase saying it would allow “market forces to play a bigger role in deciding the exchange rate”. Instead, it added that “if  needed macro prudential management will be strengthened”. Intervention at various levels should not be surprising.”