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Yuan Awaits Trump-Xi Summit, Shanghai Composite Tests Key Resistance

Yuan Awaits Trump-Xi Summit, Shanghai Composite Tests Key Resistance

2017-04-06 17:00:00
Renee Mu, Currency Analyst
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Talking Points

- U.S and Chinese leaders’ talks on trade could determine the trend for the USD/CNH.

- Chinese equities continued to rise following the theme of a new special economic zone.

- Check out how retail traders are positioning on equities using the DailyFX SSI.

To receive reports from this analyst,sign up for Renee Mu’ distribution list.

Yuan Rates

The USD/CNH is indecisive ahead of the Trump-Xi summit. The offshore Yuan pair is testing the top of a parallel for a down trend. In the coming two leaders’ meetings, trade issues will be a main focus. A major bilateral trade conflict will likely do more harm to China than the U.S., as Chinese producers are still largely relying on international demand. As a result, if Trump takes a hardline on China’s trade practices at the meetings, it will be a more bearish driver to the Yuan and may send the USD/CNH higher.

USD/CNH 4-hours

Yuan Awaits Trump-Xi Summit, Shanghai Composite Tests Key Resistance

Prepared by Renee Mu.

The PBOC weakened the Yuan slightly on Thursday, down -24 pips or -0.04% to 6.8930. In fact, the Yuan fix has been weaker than the offshore Yuan rate for nearly a month. Without the regulator further confirming on Yuan’s strength, traders will want to be cautious when look into a longer-term bearish setup for the USD/CNH.

In addition to the U.S.-China summit, the NFP report to be released on Friday will be another key driver to Dollar pairs including the Dollar/Yuan. Watch our Sr. Currency Strategist Chris Vecchio’s video for technical considerations in DXY Index.

Chinese Shares

Chinese equities edged higher on Thursday, driven by the theme of the launch of a Special Economic Zone (SPZ) in Xiongan. Multiple shares hit the daily limit-up level of 10% for the second day, including BBMG, China Fortune Land Development, Hesteel, Tangshan Jidong Cement and Langfang Development.

This drove the Shanghai Composite Index rising for the second day as well, up +0.33%. The equity index is approaching 3300, the upper bound of the yearly open range and the high day close in last November. Amid this SPZ theme, the odds of the price breaking above the key resistance level has increased.

Yuan Awaits Trump-Xi Summit, Shanghai Composite Tests Key Resistance

Data downloaded from Bloomberg; chart prepared by Renee Mu.

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