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BUZZ-COMMENT-USD/CNY bears shrug off upcoming US-China deal review

Heading into a likely contentious August 15 meeting between U.S. and China trade officials, traders briefly tapped the brakes on the yuan's rally, fearing a further escalation of tensions.

Heading into a likely contentious August 15 meeting between U.S. and China trade officials, traders briefly tapped the brakes on the yuan's rally, fearing a further escalation of tensions.

The USD/CNY pair fell to 6.9559 early Wednesday, its lowest since March, following broader greenback weakness, but not before blipping up to 6.9638. A record low for the yield on the 5-year U.S. Treasury note burdened the dollar . The bearish outlook for USD/CNY will persist if it ends below 6.9785, revalidating its daily Bollinger downtrend channel.

But a possible revival of trade issues will likely temper enthusiasm for the yuan. The scheduled six-month review of the Phase 1 trade deal arrives as data showed China is way behind its purchase targets of agricultural and energy products . Other issues, such as a forced sale of TikTok's U.S. assets, which has been labelled 'theft' by Chinese state media, are likely to be tabled.

While China is expected to reassure it will pick up its pace of U.S. goods purchases, Beijing could veer from script , in response to Washington's increasingly aggressive stance on Chinese businesses. Keeping the trade deal intact may be more important to Trump than before, as he lags Democratic presidential candidate Joe Biden in polls, and China knows it.

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(Ewen Chew is a Reuters market analyst. The views expressed are his own.)

((ewen.chew@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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