CHINA: Could The Tide Be Turning for Bond Yields in China? 

USD/CNH is pushing lower in the first part of Monday trade, with onshore USD/CNY spot also weaker. For USD/CNH this puts us back sub the 20-day EMA, a support zone that has mostly held since early Oct last year, see the chart below. Earlier YTD lows for USD/CNH came in at 7.3132, back on Jan 6 (session lows today rest at 7.2190, last near 7.3220). The 50-day EMA is back close to 7.2900 in terms of further downside targets. 

• Broader USD sentiment is softer the BBDXY index off around 0.15%. This is likely aiding the CNH, while carry over positive sentiment from Friday's Xi/Trump phone call is another potential positive. This, and Trump's desire to travel to China (per the WSJ from the weekend), may raising hopes of a less aggressive tariff start from the returning Trump administration. Trump has also pledged to delay an enforcement of a national security law for TikTok (per BBG).
• Elsewhere, onshore equities are higher, the CSI 300 up around 0.70% at this stage, while Hong Kong markets are also higher. Earlier, the China loan prime rates were held steady as expected. 

Fig 1: USD/CNH & Key EMAs 

Source: MNI - Market News/Bloomberg  

AUDUSD dipped to 0.6190 in early APAC trading but then rebounded to around 0.6200 as the US dollar weakened and equities rally. Risk sentiment has been helped by signs of a more positive-than-expected US-China relationship. It is currently up 0.2% to 0.6205. The USD index is down 0.1%. 

• AUDJPY is little changed at 96.82, after an intraday low of 96.67. AUDNZD is down 0.1% to 1.1082. Aussie is slightly higher against both the euro and pound at 0.6032 and 0.5091 respectively.
• Equities are generally stronger following Friday’s rally in the US with the ASX up 0.3% and Hang Seng +1.4% but the S&P e-mini is down 0.1%. Oil prices are little changed with WTI around $77.36/bbl. Copper is down 0.6% and iron ore is around $101.50/t.
• The US is closed for the Martin Luther King holiday but attention is on President-elect Trump’s inauguration later today and which executive orders he’ll sign on the first day.
• Later the Eurogroup meeting takes place and German December PPI, euro area November construction and the BoC business survey are released. 

US equity futures are trading slightly lower in Asia Today, please not there will be no cash equity trading tonight for Martin Luther King Day. Focus will be largely on the Inauguration of Trump and any executive orders he may sign on Day 1.

• Looking at technical levels for S&P 500, a bear threat remains present. However, Wednesday’s gains resulted in a print above resistance at 5987.04, the 50-day EMA. The average marks an important pivot level and a clear break of it would signal a possible reversal. This would open 6107.50, the Dec 26 high. Key short-term support has been defined at 5809.00, the Jan 13 low. A breach of this level would confirm a resumption of the downtrend.

• Friday saw equity benchmarks close higher with tech stocks out performing, the Philadelphia SE Semiconductor Index closed +2.84% leading to a 5.4% move higher throughout the week while the Nasdaq closed 1.50% higher, S&P 500 closed 1% higher, while the Dow Jones lagged slightly closing up 0.78%.