FxWirePro: Short-term rebound likely in USD/CNH; broad trend still bearish

A temporary short-term rebound looks increasingly likely in USD/CNH exchange rate, which has declined steadily from 6.99 in January 2017 to 6.31 as of today. It is already in a bounce back after reaching as low as 6.24 in March this year, which was the lowest level for the pair since April 2015.

Our calculations suggest that the Chinese Yuan, which has been showing remarkable strength since 2017, may face a bounce back which could push the yuan to as low as 6.4 per dollar before the board bullish trend resumes again. The calculations also suggest that the buyers are likely to start emerging one the exchange rate reaches 6.36 area.

While China’s high current account surplus, more than $3 trillion in forex reserves, and higher interest rates (though the differential has been declining lately) is fueling yuan’s strength, the possibility of a near-term weakness is being fueled by the ongoing trade dispute between the United States and China.