Chinese Yuan rebounded significantly in Asian session, sparked by PBoC’s unexpectedly strong daily fixing. The fixing was set at 7.0996, markedly stronger than the anticipated 7.2222 by analysts, marking the largest strengthening bias since November. Also, reports suggest that state-owned banks actively participated in selling Dollars onshore, further tightening offshore Yuan liquidity.
Economists interpret this orchestrated maneuver as a decisive message from PBoC, indicating a refusal to tolerate further weakening of Yuan. This action seems to correct what the authorities considered an overreaction by the market to last Friday’s sharp decline. The market’s speculation on Yuan depreciation appeared to be challenged by today’s fixing, aimed at recalibrating market perceptions.
From a pure technical perspective, USD/CNH’s rise from 0.7087 is seen as the second leg of the corrective pattern from 7.3679 for now, which is still in progress. FUrther rally is expected as long as 55 D EMA (now at 7.2056) holds. Next target is 100% projection of 7.0870 to 7.2318 from 7.1715 at 7.3163. But break of 7.3679 high is not envisaged.
However, these technical observations stand independent of the significant influence of PBoC’s interventions in the currency market.
