While trade talks between China and US might not have broken down, they’s certainly going no where. Huge differences remain in fundamental issues that neither side is going to back down from. And rhetorics of both sides during the weekend confirmed that.
Asian markets opened the week sharply lower, led by China. The Shanghai SSE dripped to as low as 2892.17, and is currently down -0.72% at 2917. Nikkei is down -0.50% while Singapore Strait Times is down -1.14%.
USD/CNH extends recently rally to as high as 6.8960 so far. The development is in line with our view that corrective pull back from 6.9800 has completed at 6.6699 already. Further rise should be seen (and might be rather quickly) to retest 6.9800 and important psychological level at 7.0000. Barring any government intervention to “halt” Yuan depreciation, USD/CNH should target 61.8% projection of 6.2354 to 6.9800 from 6.6699 at 7.1301.