USDCNH after rate cut

The PBOC injected 50 billion Yuan into the market – the first step to increase liquidity for 29 days. This was necessary in order to increase the value of 10-year tenor government bonds.

Amid ongoing pandemic risks in the global and domestic economies, the PBOC announced a surprising drop of 20bp in repurchase agreements to offset the impact of the pandemic on the Chinese economy and a 7-day repo rate cut of 2.40% to 2.20%.

It’s the third rate cut from the PBOC since November 2019, which is expected to strengthen China in order to recover from the crisis as soon as possible. It seems that China is one of the countries that was most ready to face the worst case scenario of this pandemic compared to other countries. Infected cases in China are gradually decreasing and disappearing, but this phenomenon is still ongoing in other parts of the world. And the economy is still under pressure, as the struggle continues!

The PBOC policy is a concrete act of agreement following the call of G20 leaders last week in a stimulus effort to offset the economic damage that is likely to be caused by a pandemic around the world.

USDCNH, Daily.

Last week prices moved in a range between 7.0571 – 7.1500 levels. Unlike other currencies that are experiencing high volatility, the USDCNH looks more orderly with softer volatility. Technically, the price action presents a bullish bias in the daily timeframe after breaking out the Resistance level of 7.0569. The price rally came to a halt below the high average price at 7.1638. The MAs show an upward bias, and the RSI suggests a near term downward momentum as it declines from the month’s peak, however it holds above the 50 level, precisely at the 61.03 level. The MACD is still in the positive zone. Resistance levels are set at 7.1400 and 7.1600 with Support levels at 7.0800 and 0.70563.

Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

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