USD/CNY: Risk remains to the upside - Westpac

USD/CNY retraced back to nearer the 6.92 handle upon hope that trade relations between US and China may improve, according to Frances Cheung, Head of Macro Strategy Asia at Westpac.

Key Quotes

“The recent high of 6.9771 becomes the new resistance, while support is at the 50DMA of 6.8847.”

“Risk remains to the upside for USD/CNY. First, we tend to be cautious towards US-China trade relations given past false hope. Second, capital inflows into China have slowed. Third, economic data has been soft and risk is for more soft prints. Fourth, monetary policy errs on the dovish side, though the PBoC is unlikely to flood the market with much liquidity.”