CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Chinese Yuan Forecast: USD/CNH Surges on Chip Restrictions, Trump Polling

Article By: ,  Head of Market Research
October 15, 2024 8:13 PM

USD/CNH Key Points

  • The Biden Administration is reportedly considering capping sales of advanced artificial intelligence processors to some countries that may serve as conduits for China.
  • We’ve seen an uptick in Donald Trump’s polling figures, raising the likelihood of a “trade war” with China.
  • USD/CNH is flirting with its most bullish day of the year (0.59%).

Traders have been hyper-focused on developments out of China for the last several weeks now, with the world’s second-largest economy announcing a raft of stimulus measures aimed at revitalizing the property sector, boosting liquidity, and restoring consumer confidence. The total package is estimated at 7.5 trillion yuan (around $1.07 trillion), making it potentially the largest in China's history, but traders are increasingly skeptical that without an equivalently large fiscal spending package, the impact on consumer spending and economic growth will ultimately be short-lived.

Against that backdrop, we’ve seen a big drop in China’s currency, the yuan, today. There are two primary factors driving today’s move. First, the Biden Administration is reportedly considering capping sales of advanced artificial intelligence processors to some countries. While exports to China are already restricted, some policymakers are concerned that China is using countries in the Middle East to facilitate more purchases of the most advanced semiconductors, and closing that loophole could weigh on future Chinese growth.

Separately, we’ve also seen an uptick in Donald Trump’s polling figures, to the point that he’s now approaching a 60/40 favorite on some election prediction markets. On Bloomberg today, the former President pontificated that “the most-beautiful word in the dictionary is ‘tariff,’” raising fears of another “trade war” with China if he’s elected. All else equal, large tariffs on China would be bearish for the yuan and bullish for the US dollar.

Chinese Yuan Technical Analysis – USD/CNH Daily Chart

Source: TradingView, StoneX

The chart above shows, the performance of the US dollar relative to the offshore-traded Chinese Yuan (CNH). As the 1-day ROC in the bottom panel shows, the pair 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.

As of writing, USD/CNH has retraced about half of its July-September drop, marking a possible resistance level near 7.14. If that level succumbs to continued strength, the next technical level to watch will be the 61.8% Fibonacci retracement at 7.18.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024