⦿ Executive Snapshot

• What: USD/CNH has resumed its decline, targeting levels around 6.77 to 6.69.
• Who: Societe Generale strategists and the People's Bank of China (PBoC).
• Why it matters: This trend indicates market sentiment regarding trade relations and currency valuation between the US and China.

⦿ Key Developments

• USD/CNH has failed to establish itself above the 50-DMA, limiting rebounds since last year.
• The next downside objectives are projected at 6.77 and the 2023 trough of 6.69.
• The USD/CNY has reached a 3-year low of 6.7861, showing PBoC's tolerance for yuan appreciation.

⦿ Strategic Context

• The decline in USD/CNH reflects ongoing trade tensions and the evolving economic relationship between the US and China.
• The PBoC's willingness to allow yuan appreciation may signal a strategic shift in monetary policy amid lower trade tensions.

⦿ Strategic Implications

• The immediate market consequence could be further depreciation of the USD against the CNH, impacting trade dynamics.
• Over the long term, sustained yuan strength may influence global trade patterns and investor sentiment towards China.

⦿ Risks & Constraints

• Potential risk from regulatory actions or interventions by the PBoC to stabilize the yuan if depreciation accelerates.
• The geopolitical landscape, including trade negotiations, may introduce volatility that affects currency valuations.

⦿ Watchlist / Forward Signals

• Upcoming presidential discussions between the US and China could provide insights into future trade relations.
• Monitoring for signs of a meaningful rebound in USD/CNH will be crucial for understanding market sentiment and potential reversals.