FX Strategy:Is 6.50The Line In The Sand For USD/CNY?

USD/CNY jumped back up above 6.50 to 6.53 after the PBoC was said to have refined the Counter Cyclical Factor (CCF) in USD/CNY daily central parity fixing rate.

    The change in the CCF was seen as a move registering renewed confidence in the CNY as well as signaling that authorities may not be keen for too quick an appreciation in the CNY beyond 6.50.

    Overall, we continue to see a year of two halves for USD/Asia. In 1H18, Asian currencies remain biased on the strong side, due to the strong export recovery across Asia. In 2H18, Asian currencies may give back some gains as export recovery moderates and US Federal Reserve continues its monetary policy normalization.

    Over the near term, our technical chart suggests that for USD/CNH, there is ample room for the recovery to extend higher towards 6.5865, with decent odds of 6.5820. Key support is at the 6.4665 low seen on Monday. However, this is not yet the start of a major bullish reversal.