There has been a consistent and deliberate trend of setting the daily CNY fixing rate slightly stronger, but at a measured pace. USD/CNH was last seen at 7.1636 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Daily momentum shows signs of turning bearish

"Over the past 96 days since mid-April 2025, the USD/CNY fixing rate has declined by approximately 1056 pips, averaging about 11 pips per fix. Historically, when spot-fix deviation widens, it was due to depreciation pressure in the RMB and consequently, the relatively stable fixing rates seen in early 2025, throughout 2024, and in late 2023 helped to limit RMB depreciation. However, this time, the deviation between spot and fix is driven by a lower USD/CNY fixing rate, suggesting a deliberate attempt to guide the USD/CNY spot downward, even as the spot remains above the fix."

"A gradual appreciation in RMB, gain in domestic equity market can help restore investor confidence and encourage a return of foreign capital inflows. Over the past few weeks, we have also observed net foreign equity inflow into China. These factors, alongside Fed about to resume rate cut should continue to be positive for RMB. There could be further room for RMB to appreciate should China economy see more sustained stabilisation. "

"Daily momentum shows signs of turning mild bearish while RSI fell to near oversold conditions. Key support at 7.1460 (61.8% fibo retracement of 2024 low to 2025 high). Decisive break below this support puts next support at 7.11, 7.08 levels (76.4% fibo). If USD/CNH does trade significantly lower, it will have spillover effect onto other USDAxJs. Meanwhile, resistance at 7.1770 (50 DMA), 7.1830 (21 DMA) and 7.200/30 levels (100 DMA, 50% fibo)."