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May 10, 2013
Forex Flash USD/CNY has a bearish bias – BTMU
FXstreet.com (Barcelona) - Bank of Tokyo Mitsubishi UFJ analysts believe that USD/CNY has a bearish bias and is set to move between the range of 6.1250-6.1750.
They begin by noting that this has been one of the most exciting weeks for USD/CNY in many months but add, “Then again, it doesn't take much to get us CNY-watchers excited”. They see that SAFE rule changes initially drove traders to the safety of the USD but that quickly reversed when realization hit any required USD-buying to satisfy new rules should be absorbable by markets (cf. Asia Cross Current - CNY: SAFE at Home, 8 May 2013). They write, “Neither has SAFE rule changes nor the continuation of larger down fixings led spot any farther away from its -1% strongside barrier. We think we now have enough information to conclusively declare that our previous hypothesized pace of downward fix movements in 2013 - 0.5ppt per quarter, which we set in October of last year - is too slow.” They continue, adding that tweaking up that pace toward an annual pace of 3% suggest that in the near term, spot can continue to fall. They feel that with market memories short, it probably also bears repeating that if the Global Financial Crisis hadn't occurred, past trends would have suggested the onshore USD/CNY fixing could be around 5 by now.
They begin by noting that this has been one of the most exciting weeks for USD/CNY in many months but add, “Then again, it doesn't take much to get us CNY-watchers excited”. They see that SAFE rule changes initially drove traders to the safety of the USD but that quickly reversed when realization hit any required USD-buying to satisfy new rules should be absorbable by markets (cf. Asia Cross Current - CNY: SAFE at Home, 8 May 2013). They write, “Neither has SAFE rule changes nor the continuation of larger down fixings led spot any farther away from its -1% strongside barrier. We think we now have enough information to conclusively declare that our previous hypothesized pace of downward fix movements in 2013 - 0.5ppt per quarter, which we set in October of last year - is too slow.” They continue, adding that tweaking up that pace toward an annual pace of 3% suggest that in the near term, spot can continue to fall. They feel that with market memories short, it probably also bears repeating that if the Global Financial Crisis hadn't occurred, past trends would have suggested the onshore USD/CNY fixing could be around 5 by now.