USD/CNH: Upside risks as strong fix meets USD demand – OCBC

FXStreet Insights Team FXStreet

OCBC strategists Sim Moh Siong and Christopher Wong note that USD/CNH has traded higher as Iran-related geopolitical tensions support the Dollar. Beijing has been setting a stronger CNY fix, which has helped stabilise the Renminbi and partially offset broader Asian FX softness. However, persistent USD strength and weaker risk sentiment could force even stronger fixes to counter near-term depreciation pressures, with upside levels highlighted.

Geopolitics and fixing strategy guide pair

"USD/CNH traded higher overnight as geopolitical conflict in Iran showed little signs of de-escalation. The fixing pattern this week saw a slight pick-up in setting a stronger RMB fix, with 30d rolling average change in the USD/CNY fix rising to -33pips (vs. -27 pips a month ago). Continued trend in maintaining a strong fix can bring about relative stability in RMB (especially if expected fix-to-actual fix gap does not start to deviate), and that should help to partially mitigate against Asian FX softness."

"But if USD strength persists and risk sentiment deteriorates further, then it may require an even stronger CNY fix to offset near term depreciation pressure."

"USD/CNH was last at 6.9260 levels. Daily momentum is bullish while RSI rose. Risks remain skewed to the upside."

"Resistance at 6.9370 (50 DMA), 6.9520 and 6.9780 levels (38.2% fibo retracement of Aug high to Feb low). Support at 6.8970 (21 DMA), 6.88 levels."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Week ahead: Central bank and earnings bonanza could roil markets

After joining the rate-hike club in September, the Federal Reserve looks set to stand pat in October, waiting to assess more data before deciding to hike again. Whilst this isn’t an unusual move for a central bank, it somewhat contradicts Fed Chair Kevin Warsh’s new mantra of data dependency and zero forward guidance.

CFTC Report: WTI rally runs ahead of positioning

The week in one sentence: WTI prices surged while speculative longs were cut in the week to October 20, creating the clearest price/positioning divergence. Sterling and the Canadian Dollar led the constructive currency shift, while Yen longs also rebuilt. Speculators turned less constructive on the WTI, reducing their net exposure to around 89.3K contracts.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.