USD/CNH has extended its decline, breaking below 7.12 this morning to trade its weakest level since Nov-2024. Pair was at 7.1312 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is turning bearish

"The move reflects a confluence of drivers including persistent strength in the daily CNY fix, renewed foreign inflows into Chinese equities in recent weeks, and a softer USD backdrop as the Fed prepares to cut rates. We shared earlier how the USD/CNY daily fix has been set lower over the last few months and has now started to influence spot lower after breaking past key technical levels."

"Since mid-April 2025, the USD/CNY fixing rate has declined by approximately 1070 pips, averaging about 11 pips per fix. This is a marked departure from 2023–24 and early part of 2025, when the fix was used defensively to cap RMB depreciation pressure. Today, the spot–fix gap is being driven by a stronger fix rather than RMB weakness, potentially signalling policymakers’ intent to guide USD/CNY spot lower but in a measured manner."

"Should USD/CNH continued to trade lower, it will have spillover effects onto other USDAxJs. Daily momentum is turning bearish while RSI fell to oversold conditions. Next support at 7.11, 7.08 levels (76.4% fibo). Resistance at 7.1460 (61.8% fibo retracement of 2024 low to 2025 high), 7.1760/80 levels (21, 50 DMAs) and 7.20 levels (100 DMA, 50% fibo)."