FX May 09, 2019 / 02:22 am UTC

China Flows: CNY and CNH Testing Weaker Bounds as Trade Talks Crunch Time Start

By Jeff Ng

USD/CNH has crossed the 6.8100 handle on Thursday, last at 6.8161. This was after the pair breached the significant 6.8000 big figure during Wednesday's NY session. China inflation came in as expected, but we now observe rising food inflation risk. This, coupled with PPI data, did not move the currency, compared to trade uncertainty. Liu He in the U.S. for talks and attention is on the outcome. Focus turning to the next resistance of 6.8465.

PBoC fixed mid-point at 6.7665 vs. previous close of 6.7831. This is still stronger than our forecast of close to the 6.7700 big figure. USD/CNY gapped higher and was last seen at 6.7968. CNY/CNH gap opening up once again. Beyond 6.8000, 6.9000 resistance will present a key psychological resistance level, with little technical resistance in the way. A successful deal may push the pair down to 6.7500 level.

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