The US dollar moved lower overnight, as the outsized rally in Chinese stocks saw both the onshore and offshore Chinese yuans register impressive gains versus the greenback. The onshore CNY rose 500 points, or 0.75%, with USD/CNY falling to 7.0140. In the process, both yuans broke through their 100 and 200-day moving averages, to close at their highs, a bullish technical development.

Today, the USD/CNY was fixed at a near 4-month high at 7.0310, versus 7.0663 yesterday. Both yuans flirted with 7.0000 against the dollar before retreating, and this looms as the next major technical support for both USD/CNY and USD/CNH. The yuan is clearly benefiting from inflows associated with its equity performance, and further gains in that space should see both continue to strengthen.

Elsewhere, the rotation out of the US dollar finally picked up some steam again after a long slumber last week. EUR/USD broke out of the topside of its triangle pattern to close above 1.1300 for the first time in two weeks. That sets up the single currency for more strength with 1.14000 the initial target.

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USD/JPY again failed at the 108.00 resistance zone, also home to its 100-day moving average (DMA). That looks set to cap rallies in the pair, with a retest of 107.00 likely, with crucial support being the triple bottom at 106.00.

The trade-centric Australian dollar (AUD) rose 0.50% to 0.6970 overnight, probing resistance at 0.7000, before retreating to 0.6960 after the news that Victoria was considering a second state-wide lockdown. With the RBA due to announce its rate decision shortly, AUD gains will be limited. A further test and move through 0.7000 seem likely though if the RBA springs no surprises and does not mention the level of the currency.

Across Asia, the Singapore dollar, Malaysian ringgit and Indonesian rupiah are unchanged today, after modest gains overnight. The US dollar sell-off being confined, as yet, to the yuan and major currencies. Further equity gains, and any slivers of positive news on the Covid-19 front from the US, should give renewed energy to EM Asia.

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