USD/CNH rises as US considers more tariffs

• The offshore yuan (CNH) is losing ground on talk of US raising tariffs.
• The PBOC set the midpoint rate at weakest since May 31, 2017.

The CNH is being offered at the time of writing on fears that the US may decide to further escalate its trade war with China.

At press time, the USD/CNH pair is trading at 6.8228, having clocked a high of 6.8319 a few minutes ago.

Reuters reported earlier today that the Trump administration is considering slapping a 25-percent tariff on $200 billion of imported Chinese goods after initially setting them at 10 percent.

China may retaliate in kind and the PBOC could respond by a continued depreciation of the CNY (onshore yuan) if the US raises tariffs, thus leading to further escalation of trade and currency war.

Consequently, the Chinese currency is feeling the pull of gravity. A weaker PBOC fix may have also played a role in putting a bid under the USD/CNH. The Chinese central bank set the reference rate at 6.8293 today – the lowest level since May 31, 2017.

USD/CNH Technical Levels

Resistance: 6.8443 (July 24 high), 6.8560 (July 27 high)

Support: 6.7738 (July 31 low), 6.7380 (July 26 low)