Last Friday, USD/CNH traded at a low of 7.0710 after breaking below the crucial 7.10 psychological level, according to OCBC’s FX analyst Christopher Wong.
Why USD/CNH Is Poised for Appreciation
Market rumors suggest that exporters who were holding onto USD positions are now rushing to offload them following the pair’s breach of key levels and month-end distortions. While daily momentum remains flat, the RSI indicates a potential uptick from oversold conditions. Although a rebound is possible, continued USD bearishness could lead to further breaches of technical levels.
Concerns about USD conversion flows from exporters and funds could exacerbate the sell-off in USD/CNH, especially if there is a panic rush to offload. Additionally, the unwinding of bets and hedges related to Trump’s policies may contribute to the downward pressure on the currency pair. Key support levels are seen at 7.07 and 7.08, with further support at 7.03 and 7.00. Resistance is anticipated at 7.14.
Monitoring the daily fix of USD/CNY is crucial for understanding policymakers’ stance on RMB appreciation. Despite USD/CNH trading around 7.09, today’s fix was set at 7.1027, suggesting policymakers may be attempting to slow down the RMB’s appreciation.
Analysis and Implications for Investors
For investors, the recent developments in USD/CNH indicate a potential opportunity for appreciation in the currency pair. With exporters offloading USD positions and market dynamics favoring RMB strength, investors may consider diversifying their portfolios to take advantage of this trend. However, risks remain, especially with uncertainties surrounding USD conversion flows and policymakers’ interventions.
It is advisable for investors to closely monitor technical levels, key support, and resistance levels in USD/CNH to make informed investment decisions. By staying informed about market trends and policy developments, investors can position themselves strategically to capitalize on potential gains in the currency markets.