CNH: Lags Broader USD Sell-off, CNH/JPY Dips Under 20.00
USD/CNH tracks near 7.2800 in early Friday dealings, down sharply from early Thursday highs (7.3484). The CNH posted a 0.22% rise for Thursday trade, amid a USD rout, with the DXY off 1.79%, the BDBXY index down 1.49%, as confidence in the US outlook plunged post the reciprocal tariff announcement. Spot USD/CNY ended up at 7.2818. The CNY CFETS basket tracker lost 0.26% to 98.76 (per BBG), as the yuan lagged broader USD softness.
- For USD/CNH technicals, the 50-day EMA is near 7.2690 as a potential downside target. Greater downside focus is likely to rest at the 200-day EMA near 7.2400, whilst the simple 200-day MA is near 7.2200, which we couldn't sustain below in March. On the topside we have yesterday's highs close to 7.3500, before that the 7.3000 region may attract selling interest.
- CNH was supported through Thursday trade as pessimism around the US outlook rose in the aftermath of the tariff announcement. US equities collapsed with the SPX down nearly 5%, while US yields slumped across the curve, led by the front end. The 2yr back to 3.68%, down 18bps. US-CH yield differentials are pointing to further USD/CNH downside.
- CNH did lag JPY and EUR gains, with yen up 2.2%, EUR +1.8% for Thursday's session. CNH/JPY briefly fell sub 20.00 before finding support, we were near 20.05 in early Friday dealings.
- Focus will be any trade talks between US-China, although at face value the two sides still appear some distance apart. US President Trump stated a deal on TikTok is close, with this also potentially providing an avenue for the two sides to lower trade tensions.
- The local data calendar is empty today.
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JPY: USD/JPY Touches 148.10 Before Rebounding Strongly, BoJ Dep Gov Speaks Today
Yen lagged broader USD shifts through Tuesday. USD/JPY tracks near 149.75/80 in early Wednesday dealings, losing a little bit of ground versus the USD for Tuesday's session. All the other majors have rallied against the USD, led by the EUR (up over 1.25%). Broader stagflationary concerns for the US economy weighed on dollar sentiment.
- USD/JPY broke below 148.60 support during Tuesday trade, a level that had been building in significance. Spot traded as low as 148.10 but bounced back ahead of the APAC crossover, tracking back towards 150.00 in latest dealings.
- Sentiment has been impacted by late US Tuesday comments from US Commerce Secretary Lutnick, who hinted tariff relief/compromise with Canada and Mexico could be announced Wednesday in the US during a Fox News interview. This has aided CAD and MXN sentiment and broader risk appetite. US yields also spiked late in US trade, the 10yr yield back to 4.25%, after touching 4.10% earlier in Tuesday trade.
- This moves have seen the traditional yen safe underperform through the latter stages of Tuesday US trade and early Wednesday Asia Pac trade. On the upside for USD/JPY, key short-term resistance has been defined at 151.30, the Mar 3 high. Clearance of this level is required to signal a base.
- Locally today we have the final Feb reads for the Jibun bank PMIs (services and composite). We also have a speech from Deputy Governor Uchida.
- In the option expiry space note the following for NY cut later: Y147.90-00($702mln), Y148.50($505mln), Y149.00($720mln), Y151.00-10($1.0bln), Y151.85-00($1.0bln).
NZD: NZD/USD Rises on Broad USD Weakness
- NZD/USD jumped +0.77% to 0.5660 on Tuesday, tariff considerations have been a primary driver of FX sentiment, with the USD weaker across most G10 currencies, the BBDXY is -0.60%, with the ongoing stagflationary concerns regarding the US economy also weighing on the USD.
- We tested key support on Monday at 0.5600, briefly trading below it below ticking higher a clear break here would then open up a move to retest the Feb 3 lows of 0.5516. To the upside, key resistance sits around 0.5674/.5695 (20-, 50-Day EMA).
- GDT prices declined, with the average price for whole milk powder falling to $4,061 from $4,153. The weighted average price for all milk products dropped to $4,209 per ton. The GDT price index fell 0.5%, reflecting a broad decline across dairy products.
- Expiries 0.6350 (NZD352.8m). Upcoming notable strikes: 0.5795 (NZD1.14b March 7), 0.6150 (NZD330m March 6), 0.5840 (NZD328.6m March 10)
- RBNZ dated-OIS is fully pricing in a 25bps cut in April, while there is about a 82% chance of a further 25bps cut priced for May up from about 70% last week, with a cumulative 80bps of cut priced by November, up from 64bps.
- The NZ-US 2yr swaps continues to rise, trading 3bps higher on Tuesday to -47.5bps, that is a 37.5bps move since the start of Feb
- Today we have ANZ Commodity Price & Corelogic home Values prices
OIL: US Oil Inventories Down Again
Bloomberg reported that US oil inventories fell 1.455mn barrels last week after 640k the week before, according to people familiar with the API data. Stocks at Cushing rose 1.6mn. Gasoline was down 1.25mm, while distillate rose 1.1mn and distillate. The official EIA data is released later today.
