USD/CNH: 2-way trades for the time being - OCBC

Despite Trump raising tariffs on China to 125% overnight, USD/CNH fell as broader sentiment improved. Trump unexpectedly paused higher tariffs on 56 nations (excluding China) for 90 days. Tension between US and China remain elevated, as China tariffs on US goods stand at 84% while US tariff on China goods are at 125%. US Treasury secretary Bessent has indicated all options remain on the table, including the possibility of delisting Chinese companies from US stock exchanges. USD/CNH was last at 7.3164 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Range-bound trade intact

"Yesterday, Reuters reported that PBoC is asking state lenders to reduce dollar purchases. We do not rule out the risk of further measures from both US and China but at the same time, we also do not rule out a chance of conciliation. So, risks are both ways as developments are very fluid. On RMB, we are neutral on the outlook for now. There are market chatters of RMB potentially seeing more depreciation to perhaps devaluation pressure, but we believe policymakers are likely to favour only some degree of measured RMB weakness while still maintaining a stable composure."

"The trend for daily USD/CNY fix is still an important source to gauge policymakers' preference. A softer magnitude of increase in USD/CNY fix should calm sentiments for RMB, as well as provide a breather for AxJs. But any larger adjustment seen in the fix may be taken as a hint that policymakers may allow for greater RMB flexibility."

"Bullish momentum on daily chart shows tentative signs of fading while RSI eased slightly from overbought conditions. Range-bound trade intact. Support at 7.29 (100 DMA). Resistance at 7.38, 7.42 levels. Currency bias may change or improve dependent on how trade negotiations pan out to be or if the de-dollarisation trend overwhelms."