USD CNH

USD/CNH has mirrored DXY trends quite well of late, and the Trump-fueled rally faces its next major test with US CPI data set for release tomorrow.

The Aussie’s got its eyes on the yuan. With USD/CNH pushing higher, the Aussie’s set for a potential bounce – or a big drop.

Traders are eyeing China’s stimulus announcement on Friday. Will it be substantial enough to counter weak growth and Trump’s looming 60% tariffs? The market reaction for USD/CNH, iron ore and copper hinges on the detail.

USD/JPY and USD/CNH remain heavily influenced by the US Treasury market, where rising yields are boosting the dollar’s yield advantage over both the yen and yuan. Given the ongoing trends in both rates and FX markets, the path of least resistance for these currency pairs continues to point higher.

USD/CNH is flirting with its most bullish day of the year (0.59%) on the back of the rumors of a potentially tighter cap on semiconductor exports and Trump’s rising odds of winning the election.

We’ve seen plenty of short squeezes before that have quickly run out off puff. But with speculation swirling that policymakers may follow up Tuesday’s monetary policy easing with fiscal stimulus ahead of Golden Week holidays, that alone may be enough to promote further gains in the days ahead.

For all the fundamental reasons put forward to explain their day-to-day movements, one look at price action suggests technical factors are arguably just as important in determining movements in the likes of Hong Kong’s Hang Seng, USD/CNH and crude oil. With each of these markets near important levels, we look at the price signals to evaluate where their directional risks lie.

With no major US labour market data released this week, it will be left up to central bank commentary, PMI reports, bond auctions and quarter-end flows to dictate direction. Put together, unless we see evidence of an alarming deterioration in activity from major developed nations, the combination points to an environment where riskier asset classes may outperform.

With the US dollar staging a big bearish reversal to kick off the trading week, there’s a risk we may see follow through selling before the release of the key core PCE deflator on Friday, the Federal Reserve’s preferred inflation measure. If that does eventuate, keep an eye on USD/CNH which may be influential on the broader Asia FX space, including the Japanese yen.

Only intervention from the Bank of Japan (BOJ) or a dramatic increase in Fed rate cut bets look to be standing between USD/JPY and a test of the multi-decade highs struck in late April, unless the People’s Bank of China (PBOC) moves aggressively to curb weakness.

The People’s Bank of China (PBOC) continues to loosen its grip on the Chinese yuan, sending USD/CNH highs not seen since late 2023 on Thursday. Given the influence the yuan has on emerging market and other Asian currencies, the technical break may have global ramifications if it sticks.

China’s fledgling economic recovery suffered another setback in April with activity indicators mostly disappointing, especially regarding the beleaguered property sector. The news weighed on the Chinese yuan and other Asian currencies, such as the Japanese yen and Australian dollar.

If you trade Asian currencies like the Japanese yen, Australian or New Zealand dollar, you should always keep a close eye on what’s happening in the Chinese yuan. You’re doing yourself a disservice if your not.

Chinese economic data is beating expectations at rates not seen since reopening to the world in 2023. And with the government and People’s Bank of China playing an active role in supporting mainland markets, it’s not surprising to see Chinese assets performing comparatively better than others across Asia right now.

There’s not much difference between the USD/CNH and USD/JPY on the weekly charts, other than the former appears to be lagging the latter right now. With the yen falling to fresh multi-year lows even with the threat of intervention from the BOJ, will the yuan be next?

A bearish reversal pattern has formed on USD/CNH which implies a move down to 7.10. And if the yuan continues to strengthen, it could see the yen follow and scupper USD/JPY attempt at breaking 152.

The US dollar rally since the start of the year is showing signs of fatigue, unable to build upon gains last week despite widening yield differential between the United States and other major nations, including in Asia.