CNH: CNH Lags Safe Haven FX, Bessent Says Up To China To De-Escalate
USD/CNH tracks in the low 7.2800 region in early Tuesday dealings, the pair comfortably off intra-session highs from Monday (near 7.3025). Broader USD sentiment faltered, with the BBDXY and DXY indices down around 0.50%, amid a bull steepening move for US treasuries, while lack of trade deal progress was also cited. CNH only gained a modest 0.05% for the session, so it lagged broader USD index losses. Spot USD/CNY finished up at 7.2874, while the CNY CFETS basket tracker edged up to 96.42 (per BBG).
- For USD/CNH technicals, current levels are close to where the pair has rebounded from in recent weeks and just under the 50-day EMA. The 100-day EMA is near 7.2750, while the 200-day is near 7.2535 and a likely more important watch point, as we couldn't sustain a move sub this support level through March.
- CNH lagged the safe havens in terms of JPY and CHF as Monday's session unfolded. CNH/JPY is back to around the 19.50/51 region, against recent highs of 19.7550. Monday's session saw more muted US equity price action, although we recovered late in US trade, with SPX close to flat, Nasdaq down slightly.
- Focus will remain on the US-China trade outlook, with US Tsy Bessent stating that there is discussions happening with the China government, but that it is up to China to take the first step to de-escalate (per BBG). This came after late yesterday the China Foreign Ministry denied that the two sides were discussing tariffs.
- The local data calendar is empty today, with focus on tomorrow's PMI prints. The official outcomes are due for April, along with the Caixin manufacturing index. Both manufacturing measures are expected to fall sub 50.0.
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USDCAD TECHS: Bullish Outlook
- RES 4: 1.4700 Round number resistance
- RES 3: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
- RES 2: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 1: 1.4402 High Mar 20
- PRICE: 1.4292 @ 16:50 GMT Mar 28
- SUP 1: 1.4235 Low Mar 26 and a key near-term support
- SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
- SUP 3: 1.4011 Low Dec 5 ‘24
- SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
USDCAD traded through support at 1.4242 on Wednesday but has recovered. A return lower and clearance of this level would undermine the bull theme and instead highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger. Moving average studies continue to highlight a dominant uptrend. A reversal higher would refocus attention on the bull trigger at 1.4543, the Mar 4 high. First resistance is 1.4402, the Mar 20 high.
US FISCAL: Debt Limit "Extraordinary Measures" Pick Up, But Cash Dipping Pre-Tax
Treasury data shows that there were $207B of "extraordinary measures" available to circumvent hitting the debt limit as of Wednesday Mar 26.
- That's the most since Jan 27th and up from $163B a week earlier, from a total $376B available.
- However, Treasury cash in the TGA fell to $316B as of the 26th (and was down to $280B on Thursday), meaning there were a combined $523B of resources available to avert the debt limit, the lowest since the impasse began in January (and half of the starting amount of just over $1T).
- The next couple of weeks will be very important for Treasury, as they represent the biggest tax take of the year. The Congressional Budget Office reported this week that per its estimates "if the debt limit [$36.1T] remains unchanged, the government's ability to borrow using extraordinary measures will probably be exhausted in August or September 2025." Treasury wrote to Congress this month that they would be able to provide an update on the x-date in the first half of May, after the conclusion of tax season.
AUDUSD TECHS: Remains Above Support
- RES 4: 0.6429 High Dec 12 ‘24
- RES 3: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg
- RES 2: 0.6409 High Feb 21 and a bull trigger
- RES 1: 0.6391 High Mar 17 / 18
- PRICE: 0.6291 @ 16:46 GMT Mar 28
- SUP 1: 0.6258 Low Mar 21
- SUP 2: 0.6187 Low Feb 4
- SUP 3: 0.6171/6088 Low Feb 4 / 3 and a key support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
AUDUSD is unchanged. A short-term bull theme is intact and the latest move down appears corrective. Key short-term support to watch is 0.6187, the Mar 4 low. Clearance of this level would reinstate a bear threat. First support is at 0.6258, the Mar 21 low. A stronger recovery would refocus attention on 0.6409, the Feb 21 high. Clearance of this hurdle would strengthen the bull cycle and resume the uptrend that started Feb 3.
