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Yuan comments from an ex-PBOC official – Rapid appreciation is not sustainable, Bank will act

  
Analysis, Forex

Said the rapid rise of the RMB against the US dollar may have overshot, signalling excess short-term speculation.

Speaking with Xinhua (info via Reuters)
Comments are from Sheng Songcheng, former director of the surveys and statistics department at the PBOC. Bolding is mine:
  • “We will prevent short-term money flooding from pushing up the yuan and diminishing the competitiveness of export firms”
  • “The appreciation of the yuan will squeeze margins at export firms, in particular the medium- and small-sized ones”
  • Sheng also said rapid rise in the rate will distract firms from their main business as they turn to speculative activities!
Sheng’s warnings come with the background:
  • On Friday the PBOC set the reference rate (midpoint) for onshore yuan at its strongest (for the yuan) since May of 2018
  • larger state-owned banks were reported as selling yuan against the USD last week, which would have the impact of slowing the yuan’s rise
Separately over the weekend, the PBOC-sponsored Financial News outlet warned on factors that could lead to a fall of the yuan against the USD, including:
  • policy changes by the Fed
  • strong revival of the US economy
  • control of the COVID-19 pandemic
  • a bursting of U. asset bubbles
Said the rapid rise of the RMB against the US dollar may have overshot, signalling excess short-term speculation.

Weekly CFTC Commitments of Traders data: Cable gets a bit of love

  
Analysis, Forex

Weekly futures forex positioning data from the CFTC:

Weekly futures forex positioning data from the CFTC:
  • EUR long 104K vs 100K long last week. Longs increased by 4K
  • GBP long 31K vs 25K long last week. Longs increased by 6K
  • JPY short 50K vs 51K short last week. Shorts decreased by 1K
  • CHF short 1K vs 4K short last week. Shorts decreased by 3K
  • AUD short 1K vs 3K long last week. Flipped to short
  • NZD long 8K vs 8K long last week. No change
  • CAD long 45K vs 44K long last week. Longs decreased by 1K

The pound was the top performer this month in the G10 space and it got a bit of late-month love from speculators as the net position grew to the largest since early March. The high for the year was +36K in March.

The overall net USD short is the largest since late February.

Euro could test 1.2350 ahead June 10 ECB – Credit Suisse

  
Analysis, Forex

EUR/USD is flat at 1.2192 today

EUR/USD is flat at 1.2192 today

Credit Suisse discusses EUR/USD outlook ahead of the ECB June 10 meeting.

“The risk the ECB faces is that, if it takes its eye off the ball as the Fed retains its dovish bias, EURUSD could take out 2021 highs around 1.2350 and push higher into an entirely new, and possibly very uncomfortable, trading range. It’s true that rising euro area inflation expectations and growth prospects likely make the ECB comfortable with EURUSD levels at the top end of the 1.0340 – 1.2555 range that has prevailed since the start of 2015. But we are less confident it would be excited about seeing EURUSD move back towards the average level near 1.3500,” CS notes,

“It is for this reason that, while we have assumed that EURUSD will likely test the top of our expected 1.1950-1.2350 range for the rest of Q2 ahead of the 10 Jun ECB meeting, we have held the view that the ECB will contrive to sound just dovish enough to prevent a material and sustained upside breach,” CS adds.

Be sure to keep an eye on the Chinese yuan in the days ahead

  
Analysis, Forex

The yuan is trading below 6.40 against the dollar

That applies to both the offshore and onshore yuan now, with the latter also breaking to its highest levels since 2018 as it trades past 6.40 against the dollar now.
USD/CNH
As mentioned yesterday, the thing to note here as well is that Chinese officials and media are not really offering much pushback to the latest strengthening in the currency so that may pave the way for further gains in the bigger picture.
For this week, keep an eye on the PBOC fix in the coming days. If the Chinese central bank is comfortable with a push below 6.40, that’s the first green light.
And in turn, this could translate to some selling in the dollar as well.

The CPI print couldn’t keep the euro down, a whisper of tapering won’t either

  
Analysis, Forex

The dollar is struggling to stay afloat

EURUSD daily
Last week we saw EUR/USD rapidly drop after a shock CPI report but it snapped right back over the next three days.
Yesterday was saw another quick drop on the Fed minutes. But if the CPI report couldn’t keep it down, how will the vaguest hint of a taper?
It’s now erased that part of the drop and has a bit of work to do to get to yesterday’s high of 1.2245. To my way of thinking, if something won’t fall on bad news, it will keep on rising. Europe is suddenly doing much better on vaccines and eventually they’ll sort out the recovery fund.
Meanwhile, there are some hefty option expiries at 1.2160 and 1.2175 today and tomorrow but we’ve far enough away now that I don’t expect them to come into play.

Dollar on the backfoot to start the session

  
Analysis, Forex

The dollar is slightly weaker as the market stabilises

Steady tones across the board is helping to keep the market less nervous as compared to yesterday with the bounce in crypto also helping with sentiment somewhat.
The dollar is softer across the board as such with EUR/USD clipping 1.2200 once again after defending its 100-hour moving average in trading yesterday:
EUR/USD H1 20-05
As such, buyers remain in near-term control but will have to try and look towards breaking the 25 February high @ 1.2243 to establish further upside momentum.
Elsewhere, USD/CAD is down slightly back close to 1.2100 while AUD/USD is at session highs near 0.7760 looking to test its key hourly moving averages @ 0.7765-80.

Dollar breaks to new highs after the FOMC minutes

  
Analysis, Forex

US dollar moves higher after Fed minutes

The USD has broken to new highs after the Fed minutes suggested might be time to think about tapering.

EURUSD: The EURUSD has moved to an through (at least temporarily), the swing highs from May 10 and May 11 between 1.2175 and 1.2181.  THe pair has fallen short of the 38.2% retracement of the move up from last week’s low at 1.21707 and the 100 hour moving average of 1.21605.  Getting below each of those would increase the bearish bias. The 200 hour moving average comes in at 1.2145 currently. That would also be a level that if broken would increase the bearish bias.
GBPUSD.  The GBPUSD as just broken below its 100 hour moving average of 1.41254 and looks to test its 200 hour moving average 1.41051. The low price just reached 1.41076 and trades between the moving averages (currently at 1.4117).
USDJPY: THe USDJPY his moving above its 200 hour moving average of 109.074 and its 100 hour moving average of 109.182 . The current price trades at 109.253 .  Stay above each of those moving averages keeps the bias more in the bullish direction.
NZDUSD:  The NZDUSD has moved below its 100 day moving average at 0.71753 and traded to a low price of 0.7154. Stay below the 100 day moving average keeps appears more control. ON the downside, the 0.71495 to 0.71549 is a swing low support area (see yellow area and red numbered circles in the chart below).
NZDUSD on the hourly chart
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