Chinese Yuan Forecast: USD/CNH Targets Key Resistance Ahead of China’s Trade Data

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CHINESE YUAN, USD/CNH, CHINA DECEMBER TRADE BALANCE, BOK - TALKING POINTS

• The PBOC’s next move to ease policy may come as soon as this week
• China’s December trade balance in focus, $73.95 billion surplus expected
• USD/CNH losses hold steady going into the weekend after broad USD weakness

 

The Chinese Yuan is trading near its January low versus the US Dollar as China’s December trade data readies to cross the wires in today’s Asia-Pacific session. Analysts see China’s trade balance rising to $73.95 billion from November’s $71.72 billion, according to a Bloomberg survey. However, export growth is seen slowing to 20% from 22% on a year-over-year basis.

China may move to ease policy through a reduction in the medium-term lending rate, which currently stands at 2.95%. The People’s Bank of China (PBOC) last cut this key rate back in April 2020. However, policymakers have already taken other actions to help bolster economic activity following last year’s property market slowdown triggered by the Evergrande crisis.

Meanwhile, Tokyo raised its Covid alert status amid increasing hospitalization and daily case rates, which rose above the 3,000 a day mark – that is the highest since September. China’s zero-Covid strategy is also being put to the test again, with over 20 million people under some form of government-imposed restrictions.

Today, the Bank of Korea (BOK) will conclude its December policy meeting. The central bank is expected to hike its benchmark rate by 25 basis points from 1.0% to 1.25%. The Korean Won is trading near the strongest levels of the year versus the Greenback. Asian equity markets may open lower today following a weak overnight Wall Street session. The Nasdaq 100 Index (NDX) fell over 2% in New York.

USD/CNH TECHNICAL FORECAST

USD/CNH is down around 0.30% this week on a broadly weak US Dollar. Prices are eyeing the May swing low at 6.3526, a likely zone of support that has underpinned the pair in recent weeks. A clean break below that level would open a route to test the 2021 low at 6.3306. Alternatively, a rebound faces potential resistance from the falling 50-, 100- and 200-day Simple moving Averages (SMAs).

USD/CNH DAILY CHART

Chart created with TradingView

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES
Thomas Westwater, Analyst, DailyFX
14 January 2022