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Sep 17 - 05:55 AM

EUR/USD - COMMENT-CNH Rise Rings Death Knell For EUR/USD Rally

By Jeremy Boulton  —  Sep 17 - 03:45 AM

The moment China's CNH began to strengthen the EUR/USD rally lost momentum before the pair topped and then headed substantially lower nL1N2GE05J.

If China continues to allow the yuan to rise it should continue to weigh on a euro that many traders are holding and is a major component of the CNH basket.

Trade-weighted CNH has since July 31 rallied 3.6%, reaching its highest since April 8 today.
On July 31 EUR/USD reached 1.1908.
At that point EUR/USD was rising rapidly having gained 6.6% in just 30 days.

From that point on the EUR/USD rise slowed markedly.
The pair did carve out a new 2020 peak after another 22 days.
That high was only 106 pips (0.89%) above the peak seen on July 31.

The timing of significant changes for both currencies is not a coincidence.
Yuan strength is also being viewed positively fuelling risk-on movement for other emerging or commodity currencies.

The euro, as an extremely liquid and negative yielding currency, is an ideal way to fund such investments.

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Refinitiv IFR Research/Market Commentary


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