USD/CNY fades a bounce to 6.3445, CNY bulls back in control

The USD/CNY cross stalled its downward spiral and staged a solid comeback from the lowest levels seen since August 2015, hitting fresh weekly tops of 6.3445 on Thursday. However, the bulls failed to keep up the renewed upturn and corrected sharply to now trade below the 6.3200 mark.

The Chinese Yuan came under heavy selling pressure versus its American counterpart earlier in Asia after China reported a much bigger-than-expected shrink in the trade surplus on the back of a massive jump in imports. 

China’s Jan trade data (Yuan terms): Surplus shrinks on huge imports surge

Over the last hours, the Chinese currency is seen making minor-recovery attempts from one-week lows, in the wake of the latest reports that China resumed its Qualified Domestic Limited Partnership (QDLP) plan after a two-year halt, granting licenses to about a dozen global money managers that can raise funds in China for overseas investments.

Meanwhile, Zhou Hao, an Economist at Commerzbank AG in Singapore, cited by Bloomberg, noted: “Excessive confidence led to an excessive rally in the Yuan, and then there came excessive concerns on intervention, which resulted in excessive nervousness.”

“The pressures reached a peak today as the trade data surprised and stocks slumped. So the result was a stampede with stop-loss being triggered and Yuan bulls rushing to the exit. The currency will remain pressured in the coming weeks,” Zhou added.

USD/CNY Technicals:

Higher-side levels: 6.3300 (natural resistance), 6.3445 (weekly tops), 6.3477 (Jan 30 high).

Lower-side levels: 6.3000 (key psychological levels), 6.2526 (2.5 year lows), 6.2079 (Aug 2015 low).