USD/CNH surges to 3-week high amid Hong Kong protests, trade woes

Breaking its two-week-old trading range, the USD/CNH pair rallies to the highest since July 08 as it makes the rounds to 6.8945 during early Monday.

While the plunge in China’s June month Industrial Profits and protests at Hong Kong can mostly be spotted behind the quote’s recent rise, investors’ cautious mood ahead of the key US-China trade talks in Beijing also seems an important reason for the present momentum.

China’s June month Industrial Profits slumped -3.1% YoY versus a 1.1% increase in May.

At the geopolitical front, protesters in Hong Kong initially took over the streets against the Chinese extradition but later on shifted to other issues including a call for more democracy, police brutality, etc.

The US delegation led by the Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will begin the 2-day long trade negotiations in Beijing from tomorrow onwards. Both the global superpowers are less likely to settle for a deal this time, as per many top-tier media releases from the US and China. However, chances of China increasing the US farm imports are bright.

While Chinese economic calendar is mostly silent, expected recovery in the US Dallas Fed Manufacturing Index to -5.1 from -12.1 could add further strength into the pair. However, doubts over the US Federal Reserve’s next policy decisions and comments from the US President Donald Trump might exert downside pressure on the momentum.

Technical Analysis

Unless successfully clearing 6.9000 round-figure, chances of the pair’s drop to 6.8700 and the 200-day exponential moving average (EMA) around 6.8165 can’t be denied. On the upside, early-June low surrounding 6.9150/55 can please buyers past-6.9000.