USD/CNH: Consolidation after breaking out – OCBC

FXStreet Insights Team FXStreet

USD/CNH fell sharply below 7.26 at one point after Trump announced there was no immediate plans for tariffs and calls for further study. USD/CNH was last seen at 7.2712 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Tariff situation remains highly uncertain

"That said, tariff development remains highly uncertain in terms of timing, magnitude and scope of products, hence its implication on markets can be binary for now. A longer delay in tariff announcement may provide an extended breather for risk proxies, and USD/CNH could trade lower. However, a swift implementation of tariff is expected to undermine sentiments and provide a boost to USD/CNH."

"For now, it appears that Trump is in the midst of trying to cut a deal, threatening with 25% tariffs on Mexico and Canada today and setting a deadline of 1 Feb. For China, tariff concerns should restrain the offshore yuan from strengthening too much, though it’s also unlikely to see CNH trade weaker until there’s greater clarity on the US’s trade policies. In the interim, stale CNH shorts could be forced to unwind if there is a longer delay in announcing tariffs on China."

"Daily momentum is bearish bias while RSI fell. Risks are skewed to the downside. Support at 7.2540 and 7.22 levels. Resistance at 7.2950 (50 DMA), 7.33 (21 DMA)."

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FXStreet Insights Team

FXStreet

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