Macro Dragon: USDCNH > 7.1400 signals danger on US|CH... Macro Dragon: USDCNH > 7.1400 signals danger on US|CH... Macro Dragon: USDCNH > 7.1400 signals danger on US|CH...

Macro Dragon: USDCNH > 7.1400 signals danger on US|CH...

Macro 4 minutes to read
Kay Van-Petersen

Global Macro Strategist

Summary:  Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.

(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon: USDCNH > 7.1400 signals danger on US|CH... 


Top of Mind…

  • To those from the UK, SG & US, welcome back from the long wkd & good luck on the final trading days into month end.
  • As we mentioned in yest’s Macro Dragon Welcome to WK 22 – USDCNH should be on everybody’s dashboard. The US / CH weekly cold to colder relationship is a new underlying theme that may at some point create some serious risk-off for certain asset classes & securities
  • The paradox of course is that technically, US equities have their anti-gravity boots on (yes still need to break above 100 & 200DMA of 2970 & 3000). After the SPX posted +3.2% last wk to the c. 2955 lvls, its seem almost certain that they will break 3,000 this wk (this Tues morning Asia the S&P futures are +1.4% at 2993) & we could be in for the NDQ (which +3.3% from breaking its ATH of 9737, set on the 19 of Feb – the Fri before Italy joined, then took over the global Covid-19 charts). Don’t hate the messenger, the technicals are the technicals & for now… it still seems like the path of least resistance is to the upside. Its not just about breaking it, but holding the lvls.
  • The fact that the VIX & the vol of vol have pretty much gone sideways since early May, suggests to KVP at least that the likely next structural move on vol is lower. Point being, elevated lvls of volatility have time decay working against them. Does not mean that a move lower in volatility could be miss-priced & we can’t get back over 40 or 50 on the VIX, its just we are struggling to meaningfully get back structurally above 30. In fact, the move to 20 is likely ‘easier’ than a move to +35. Yet you know what could potentially take equity volatility higher & curb, or at the very least give a short-term reversal to the US equity ascent?
  • That’s right US / CH… HK has become the latest epicenter, with clearly only parts of the world noticing or perhaps folks calling on the ‘boy who cried wolf’ analogy… i.e. they had the umbrella movement & protests for months, legal wranglings before, then C19… surely HK will get through this latest saga as well. Hard to say for the Dragon, yet there are at least four things we can say with high probability.
  • One: The stakes are higher now in a post C19 world, as its gone from economic posturing to the much more dangerous kind, societal/cultural/heritage posturing – the former is generally more rationale & weighted towards benefits & costs to the economy & society, the latter is about face & perception of power. From CH perspective its pretty simple, this was (& is) a sovereign territory of theirs, extracted from them through a lease to the then colonial world powers of the world, the Great Britain & it is time to heal that historical slight.
  • From the US (Trump administration) perspective it’s pretty simple, its yet another button to press to either enhance Trump’s “strong man” stance on China & American interests as we countdown to the Nov elections, as well as potentially extract further trader terms (china to buy more US assets) and also potentially placate the backlash back in the US at the Trump administrations’ abysmal handling of the C19 outbreak on US soil. As in all Crisis there is a lot of anger. And as in most crisis, there is no leadership accepting responsibility so scapegoats need to be found – remember bankers in the GFC? At one point people were being told to not wear suits or anything that looked professional going into work. The questions here is will Trump & his administration follow through in making China the scapegoat? 
  • Two: A lot of the folks that KVP knows from HK – who are as embedded as one can get & have been there for decades, are not so sure this time around that things will sail through. This time it could be different. The two big things are obviously a repegging of the HKD to the CNH, as well as HK losing its special status to the world.
  • Three: At 7.1435 USDCNH is at the top of its YTD range, with the 7.1653 high clocked on Mar 19th when we had global risk-off. A break above 7.15 could easily take us to new near-term highs & even challenge the 7.1965 high set on 3 Sep 19. So long as the USDCNH remains elevated & ready to break higher, we may be at the cusp of bite over bark. i.e. there really is a wolf in the fields.
  • Four: Whilst just 3m ago, a US/CH trade deal fall-out would have been abysmal for both US, global equities & risk assets in general. This time around, KVP is not so sure. For one thing, you have a Fed/Treasury that have committed to doing whatever it takes – in fact, such a deal break may be construed as a great opportunity to buy the dip, after all, the Fed always rides into town on a greenback horse to save the day. Point here is, the vast majority of the move up continues to be (imho) driven by liquidity by the Fed & not fundamentals.
  • Lets look at it like this, if you were to take away all the liquidity that the fed has done today, where do you think SPX would go from these 2955 lvls? That’s right… likely at least sub of 2000 if not 1500. But liquidity & Fed still reign supreme… can they do this forever? No, look at Japan Equities & the fact that BoJ has been buying them for years… Yet it could still take 6-24m for the Fed’s Lack of Impact = BoJ’s Lack of Impact. Abenomics was really about BoJ liquidity & since being announced in 4Q 2012, the NKY ran for 3 straight years for a c. +150% move , before retracing c. -30% over the course of a year (Aug 2015 to Jun 2016), then going on a two & half year stint to 24448 highs on 5 Oct 2018, where it clocked a +65% move. Now obviously the tail end of this also has to do with the longest business cycle on record that we had in the US, but the underlying point here is that its not insane to think that SPX can double from these 3000 lvls to 6000 before the Fed's liquidity bang for buck finally dissipates - like an EMP on a new years countdown in New York city.     
  • Back on deal break - This would obviously not be symmetrical to CH equities & perhaps even more importantly Asia, EM equities & FX. A phase one deal break, means more tariffs & potentially also means a USDCNH well north of 7.20, which would crucify the likes of the Aud & also likely get a knee jerk move to USD higher, bond prices higher, VIX 28 back above 35-40, gold 1726 above 1780/1800 & of course a -5% to -15% run on things like the HSI.



On The Radar Today

  • NZ: Trade balance 1267m a 1250m e 722m p
  • JP: All industries Activity, BoJ Core CPI  (note National CPI last wk turned negative, which was the first time since Jan 2017)
  • EZ: ECB Financial Stability Review, GER Gfk Cons. Climate
  • US: House Prices, CB Cons. Confidence, New Home Sales & FOMC’s Kashkari @ 01:00 SGT
  • Early door tmr @ 05:00 we’ll actually have BoC’s Poloz speaking, as well as RBNZ Financial Stability Report due


Start-End = Gratitude + Integrity + Vision. Create Luck. Process > Outcome. Sizing > Idea.





The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.