USD/CNH traded briefly above 7.31 before turning lower into the week’s close, OCBC FX analysts Frances Cheung and Christopher Wong note.

The pair moves lower tracked broad USD pullback

“Move lower tracked broad US Dollar (USD) pullback while daily fixing reverted to +5pips/day last week (vs. +15 pips/day during 19 – 28 Jun). Today’s fixing came in at -3pips at 7.1286 (vs. 7.1289 on Fri).”

“That said, recent USD/CNY fixings continued to follow a pattern that reinforced our view that authorities are pursuing a measured pace of RMB depreciation, in attempt to let out some depreciation pressure. We believe the Intent is not to pursue a big bang approach so as not to undermine sentiments (for fear of accelerating outflows) – we continue to monitor.”

“But overall, higher USD/CNY fix, wider CNH-CNY spread and worries of escalation in US-China trade tensions may imply some concerns on RMB in the immediate horizon. USDCNH was last at 7.2867 levels. Mild bullish on daily chart eased but decline in RSI moderated. 2-way risks. Resistance at 7.31, 7.3440 (previous high in Oct 2023). Support at 7.28, 7.2770 (21 DMA) and 7.26 (50 DMA).”