USD/CNY Weekly Fundamental Analysis, April 25 – April 29, 2016 -Forecast

For the third consecutive week, the USD/CNY consolidated inside a tight range, settling at 6.47349, down 0.00917 or -0.14%. The price action clearly indicates that investors are waiting for the next major signal that could come from the U.S. Federal Reserve on Wednesday. There are no major reports expected from China until Manufacturing PMI and Non-Manufacturing PMI on Saturday/Sunday, April 30/May 1.

Although the Yuan finished the week lower against the U.S. Dollar, earlier in the week it rose to the highest level in a week against a basket of peers, boosted by a stronger fixing and comments by the central bank governor that the economy is showing signs of rebounding.

Central bank governor Zhou Xiachuan said the nation’s economy had a good start this year and the Yuan’s rate in reference to the basket was basically stable, according to a statement posted on the PBOC’s website on April 16.

In other news, the world’s top gold consumer China launched a Yuan-denominated gold benchmark last Tuesday, as the country looked to exert more control over the pricing of the metal and boost its influence in the global bullion market.

The benchmark price will be set twice a day based on a few minutes of trading each session and the PBOC hopes, “The Shanghai gold benchmark will provide a fair and tradable Yuan-denominated gold fix price…will help improve Yuan pricing mechanism and promote internationalism of the Chinese gold market.”

The U.S. Federal Reserve will issue its interest rate decision and monetary policy statement on April 27after holding a two-day meeting.

The Fed is widely expected to leave interest rates unchanged with only 2.3 percent of traders looking for a rate hike. However, its monetary policy statement may contain language that boosts the possibility of a rate hike in June.

In its last statement, the central bank reduced the number of potential rate hikes from four to two, citing threats from global headwinds. Since these have failed to materialize, the Fed may hint at resuming its tightening cycle in June.

Look for the U.S. Dollar to firm against the Yuan if the Fed inserts hawkish language into its monetary policy statement. 

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which cover the current week and are published by Sunday before the new week begins. Daily as the markets close we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole. Please click on the links to find the most recent reports for this asset.

Major Economic Events for the week:

Monday, April 25, 2016

AUD        ANZAC Day Holiday

NZD        ANZAC Day Holiday

Tuesday, April 26, 2016

Wednesday, April 27, 2016

Thursday, April 28, 2016

Friday, April 29, 2016

  JPY        Showa Day Holiday

Government Bond Auctions

Date Time       Country           Auction

Apr 25 N/A UK 2.5% July 2065 Gilt (Syndicated tap)

Apr 25 11:35 Germany Eur 1.5bn Apr 2017 Bubill

Apr 26 11:10 Italy Holds BTPei auction

Apr 26 19:00 US Holds 2-year note auction

Apr 27 11:03 Sweden Holds bond auction

Apr 27 11:10 Italy Holds CTZ auction

Apr 27 11:30 Germany Eur 1bn 2.5% Aug 2046 Bund

Apr 27 19:00 US 2-year FRN, 5-year note auctions

Apr 28 11:10 Italy Holds 5yr/10yr bond auctions

Apr 28 19:00 US Holds 7-year note auction