FX Update: USDCNH breaks above 7.00. USD eyes Retail Sales. FX Update: USDCNH breaks above 7.00. USD eyes Retail Sales. FX Update: USDCNH breaks above 7.00. USD eyes Retail Sales.

FX Update: USDCNH breaks above 7.00. USD eyes Retail Sales.

John Hardy

Head of FX Strategy

Summary:  The US dollar remains firm after the shocking CPI data from Tuesday and with US Retail Sales for August today the latest data point ahead of the FOMC meeting next Wednesday, where a sizable minority are looking for 100 basis points from the Fed, while US long yields have run out of range to the upside. The Chinese yuan is trading weakly after China passed on easing rates any further overnight and despite the country moving to ease rules on property investment, with USDCNH hitting 7.00 today.

FX Trading focus: USDCNH breaks above 7.00. USD eyes retail sales, new peak in long yields.

The reaction in US yields and the US dollar after the far stronger than expected US August core CPI data from Tuesday is holding up well, with US yields all along the curve perched at or near the highs for the cycle and the 10-year US Treasury benchmark yield running out of range into the key high from June at 3.50%. The US Retail Sales report for August out shortly after this article is published is likely to drive the next step for US yields and the US dollar, which will likely move in the same direction. Somewhere out over the horizon, however, I wonder how the US dollar trades in the event a recession is afoot and investors are still marking down equities, not on a the challenge to multiples from higher yields, but on a profits recession. The past “norm” is for equities to only bottom out during the phase in which the Fed is rapidly easing to get ahead of a cratering economy. For now, the bout of risk off has seen NZD and NOK as the interesting pair of weakest currencies, with AUD and CAD not far behind and sterling struggling a bit more today, even as the market edges up the pricing of the Bank of England next week closer to 75 basis points (still only slightly more than 50/50 odds according to futures prices). Sterling almost can’t hope to perform well if risk sentiment

But perhaps most importantly, the USD sell-off picked up its pace a bit today on USDCNH breaking above 7.00 for the first time since the summer of 2020 and despite constant PBOC pushbacks via setting the daily fixing stronger for the last three weeks and more on a daily basis. Overnight, China kept its rate unchanged as well, though there were a couple of bright spots in thew news from China overnight, as local authorities have listened to Xi Jinping’s calls for easing up on property investment with a raft of measures. As well, the Chengdu Covid lockdowns are easing. Still, any significant extension above 7.00 in USDCNH will have markets on edge, particularly if the 7.187 all time highs come into view.

The USD strength and yield remaining pinned higher have emboldened prevented a further slide in USDJPY after USDJPY traded south of 143.00 overnight. We all know that the BoJ/MoF will more than likely step in if USDJPY trades north of 145.00 again, but note the more profound correction in crosses like AUDJPY, possibly a better place to speculate for a JPY resurgence if risk sentiment remains downbeat. That pair has rejected the recent extension above 97.00, though it probably needs to cut down through 95.00 together with tamer long global yields to suggest something bigger is afoot.

The Aussie caught a broad, if brief, bid overnight on a strong August jobs report, but wilted again in today’s trade as risk sentiment deflated once again and as the move lower in the CNH versus the US dollar picked up a bit of extra steam and crossed the psychologically important 7.00 level. Watching the lows for the cycle here below 0.6700 for a possible extension to at least 0.6500 on a break lower and a retest of the cycle lows from June.

Source: Saxo Group

Table: FX Board of G10 and CNH trend evolution and strength.
Interesting to note the CHF topping the leaderboard as EURCHF tries at the cycle lows today and Europe can’t get on the same page on its attempts to cap energy prices (drives risk of higher CPI outcomes and more CHF strength to offset). Elsewhere, the NZD is the weakest of the lot, while Japanese officialdom has impressed with its latest verbal intervention, as can be seen in the tremendous momentum shift over the last week in the broader JPY picture.

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
AUDNZD remains in a positive trend, but it’s at a multi-year range top as we watch whether a proper trend develops. Elsewhere, NZDUSD is grinding down into the psychologically challenging sub-0.6000 levels, while USDCAD is banging on the cycle resistance at 1.3200 and USDNOK is poking at local highs and only a bit more than a percent from its highest close since the pandemic panic of early 2020 around 10.25. Wondering if today will prove a pivot day for EURGBP that confirmed the up-trend.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights

  • 1230 – US Weekly Initial Jobless Claims
  • 1230 – US Sep. Empire Manufacturing
  • 1230 – US Aug. Retail Sales

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, 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. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such 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.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.