12 Jan 2015
USD/CNH might drop back to 6.1700/6.1800 range – Westpac
FXStreet (Barcelona) - The Westpac Team feels that a healthy surplus print in tomorrow’s Chinese trade data might lead the authorities to drop the fix by 200 points, thereby leading USD/CNH to drop towards 6.1700/6.1800 range.
Key Quotes
“In our last update on the Chinese currency we argued against chasing USD/CNH higher. Now USD/CNY/CNH has certainly moved higher since we published that piece, however, we would continue to argue against chasing the pair higher. Our basic argument since our last update has not changed a great deal - the fixing bias from the Chinese authorities continues to suggest the authorities are unwilling to sponsor aggressively higher levels in USD/CNY/CNH.”
“The fixing levels for USD/CNY have been rising but this has abruptly changed in recent sessions. Last Friday the fix fell 6 points versus our model prediction of a 23 point rise, while today the fix fell 63 points versus our expectation of a 36 point drop. This will fuel expectations of a healthy surplus when tomorrow's trade data prints. This drives our near term bias to sell rallies between now and the trade figures, with 6.2050 likely to be a cap in the near term.”
“If a healthy surplus prints the authorities could drop the fix as much as 200 points (note the average drop has been around 200 points in and around the trade data for the past 6 months). Such an outcome would provide a further boost to CNY/CNH sentiment and we would see scope for spot USD/CNH to drop back into the 6.1700/6.1800 range on such an outcome.”
“We also look for CNY/CNH outperformance on an intra-Asia basis, although as we note below, better entry levels to be such currencies like SGD, TWD and MYR may present themselves in the next week or so.”
Key Quotes
“In our last update on the Chinese currency we argued against chasing USD/CNH higher. Now USD/CNY/CNH has certainly moved higher since we published that piece, however, we would continue to argue against chasing the pair higher. Our basic argument since our last update has not changed a great deal - the fixing bias from the Chinese authorities continues to suggest the authorities are unwilling to sponsor aggressively higher levels in USD/CNY/CNH.”
“The fixing levels for USD/CNY have been rising but this has abruptly changed in recent sessions. Last Friday the fix fell 6 points versus our model prediction of a 23 point rise, while today the fix fell 63 points versus our expectation of a 36 point drop. This will fuel expectations of a healthy surplus when tomorrow's trade data prints. This drives our near term bias to sell rallies between now and the trade figures, with 6.2050 likely to be a cap in the near term.”
“If a healthy surplus prints the authorities could drop the fix as much as 200 points (note the average drop has been around 200 points in and around the trade data for the past 6 months). Such an outcome would provide a further boost to CNY/CNH sentiment and we would see scope for spot USD/CNH to drop back into the 6.1700/6.1800 range on such an outcome.”
“We also look for CNY/CNH outperformance on an intra-Asia basis, although as we note below, better entry levels to be such currencies like SGD, TWD and MYR may present themselves in the next week or so.”