Oct 16 (Reuters) - China's CNH has had an instrumental influence on traders' biggest bet, EUR/USD longs, and with those bets still enormous CNH's path remains crucial.
When EUR/USD soared earlier this year it did so on the back of a CNH drop. After July, CNH began to rally and EUR/USD's rally stalled. The CNH has now regained almost all its earlier decline. Despite bullish expectations and a seemingly unchanged technical and fundamental picture, EUR/USD has failed to rise, and part of its failure is due to its heavy weighting in China' currency basket.
With CNH close to a more than six-month high just before the release of data that's expected to see China's economy pick up pace when Europe is in the grip of a second wave of the coronavirus, it seems likely that even bigger CNH gains will weigh even more heavily upon EUR/USD.
The probability of bigger position adjustment will rise nearer the end of the year and the likelihood of a higher CNH is growing.
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Trade weighted CNH and EUR/USDhttps://tmsnrt.rs/2SXg0Vg
(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.