CNH: USD/CNH Back Sub 200-day EMA Support, China To World Equity Ratio Surges
USD/CNH tracked near 7.2280 in latest dealings, CNH gaining 0.50% for Tuesday's session. This was close to USD index losses (BBDXY down 0.46%), as the EU bloc currencies continued to rally. CNH did outperform safe havens like JPY though. USD/CNY spot finished up at 7.2302. The CNY CFETS basket tracker was still lower though at 98.83, per BBG (off a further 0.12%).
- USD/CNH is now back under its 200-day EMA (near 7.2385). Further downside could see 7.2000 round figure support tested.
- Focus is likely to rest on whether we see any material shift in the USD/CNY fixing today, with the fixing not drifting too from 7.1700 for an extended period of time.
- The rebound in core yields didn't impact CNH sentiment meaningfully. Yesterday saw onshore equities close higher, the CSI 300 up 0.32%. The China to global equity ratio is now above early Oct highs, see the chart below, the white line (note USD/CNH is inverted on the chart).
- Unwinding of US exceptionalism plays, coupled with inflows into China related equities, with Hong Kong seeing strong inflows from the mainland, while inflows from South Korea into Hong Kong equities have also picked up, is likely aiding broader underlying China related asset sentiment, including the yuan. Regulators also vowed to boost long term funds into equity and other capital markets (see this BBG link).
- Bloomberg states though that trade talks between the US and China are stuck at lower levels. This could limit USD/CNY downside if little progress is seen over the medium term.
Fig 1: China To World Equity Ratio & USD/CNH (Inverted)
Source: MNI - Market News/Bloomberg
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JGB TECHS: (H5) Trend Needle Points South
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 140.00 @ 16:41 GMT Feb 7
- SUP 1: 139.88 - Low Feb 07
- SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing
A clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. For now, short-term gains are considered corrective.
ASIA STOCKS: Equity Flows Mixed To End The Week
Mixed Flows to end the week on Friday. Taiwan started last week with heavy outflows, however saw inflows to end the week. India continues to see strong outflows with a net outflow of $9.2b for the year.
- South Korea: Recorded -$169m in outflows yesterday, bringing the 5-day total to -$210m. YTD flows remain negative at -$1.21b. The 5-day average is -$42m, better than the 20-day average of -$70m but worse than the 100-day average of -$142m.
- Taiwan: Posted +$649m in inflows yesterday, reducing the 5-day total to -$774m. YTD flows are negative at -$2.04b. The 5-day average is -$155m, worse than the 20-day average of -$102m and the 100-day average of -$105m.
- India: Recorded -$411m in outflows yesterday, bringing the 5-day total to -$841m. YTD outflows remain significant at -$9.26b. The 5-day average is -$168m, better than the 20-day average of -$365m but worse than the 100-day average of -$170m.
- Indonesia: Posted -$31m in outflows yesterday, bringing the 5-day total to -$233m. YTD flows are negative at -$462m. The 5-day average is -$47m, worse than the 20-day average of -$16m and the 100-day average of -$14m.
- Thailand: Saw +$30m in inflows yesterday, bringing the 5-day total to +$74m. YTD flows remain negative at -$256m. The 5-day average is +$15m, better than the 20-day average of -$10m and the 100-day average of -$16m.
- Malaysia: Registered +$21m in inflows yesterday, reducing the 5-day total to -$38m. YTD flows are negative at -$740m. The 5-day average is -$8m, better than the 20-day average of -$33m but worse than the 100-day average of -$26m.
- Philippines: Recorded +$7m in inflows yesterday, bringing the 5-day total to +$28m. YTD flows remain negative at -$86m. The 5-day average is +$6m, better than the 20-day average of -$3m and the 100-day average of -$2m.
Table 1: EM Asia Equity Flows
JGBS: Futures Downticked Overnight Friday, More US Tariff News Due Today
In post-Tokyo trade, JGB futures closed with a downtick, -2 compared to settlement levels, after US tsys finished cheaper on Friday.
- US tsys gapped richer after lower-than-expected jobs gains for January, and a small dip in the unemployment rate -- but quickly reversed on robust two-month net revisions along with a smaller-than-expected benchmark revision.
- Wage growth meanwhile also surprisingly accelerated but against a notable caveat of average weekly hours sliding to lows last seen in the depths of the pandemic and mid-2010.
- Fed rate cut expectations were trimmed to 37bp of cuts for 2025 vs 43bp pre-data.
- Headlines have crossed from Bloomberg, with US President Trump stating that the US will announce tariffs of 25% on all steel and aluminium imports from Monday.
- The meeting between Japan PM Ishiba and US President Trump from late last week will likely be seen as a success from a Japanese standpoint. The US leader doesn't appear to have Japan in his crosshairs from a trade standpoint at this stage, although does want to eliminate the trade deficit the US has with Japan. Ishiba spoke about raising Japan's imports of US LNG and boosting Japan's investment in the US.
- Today, the local calendar will see Current Account Balance, Bank Lending and Eco Watchers Survey.
