Chinese Yuan Technical Analysis: EUR/CNH, USD/CNH Rates Outlook
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Chinese Yuan Outlook:
USD/CNH rates have tumbled towards their yearly low, and in the grand scheme of things, the rally seen at the start of 2021 may have been a brief setback before a deeper setback.
More weakness in USD/CNH is good for risk appetite, regardless of what’s happening in EUR/CNH.
Falling US Treasury yields, higher US equity markets, and surging commodity prices suggest that traders are finding the environment not so favorable for the US Dollar.
Chinese Yuan Says ‘Go’
Stable if not softening US Treasury yields have proved to be among the most significant factors driving asset allocation decisions within the EM FX space in recent weeks, and the latest drop in US yields following the April US labor market report has spurred another rally in EM FX. For traders, a weaker US jobs report means the Federal Reserve will keep rates lower for longer without altering its QE program.
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Chinese Yuan Outlook:
The Chinese Yuan gained sharply versus the major developed currencies over the past nine months, but Chinese New Year appears to have put the kibosh on the rally for now.
Both EUR/CNH and USD/CNH rates have risen in recent weeks, perhaps foreshadowing a more difficult period for risky assets.
It’s important to consider that Chinese statisticians typically combine data for January and February to smooth out volatile figures around the Chinese New Year, so it may be short-sighted to take recent price action as indicative of ‘true’ conditions.