Keep a very close eye on the USD/CNH

Back in 2022 the USD/CNH (offshore Chinese Yuan) reached its highest level ever, at 7.3749. The high seen at the beginning of March this year saw it come to within a wafer of reaching that, when it topped out at 7.3734. The drop back from that high saw it fall to around 7.2150. Today the USD/CNH has seen it reach 7.3651. The further threats of yet more US tariffs by Trump on Chinese imports has seen him talk of another 50% levy on top of the more than 54% already announced. This has been met with scorn by Chinese authorities and not long ago this morning trade talks between the two nations were said to stall without progress-hardly a surprise folks. The price action across the USD/CNH is important to watch from here on, because there are already indications the PBOC is set to kick off a currency war with the US, if the situation on trade deteriorates even more than it has already. If that does kick off, then a break above 7.3750 would be the first sign the PBOC have just fired the first shot and if that happens it could deliver a significant upside move. We shall have to see how this plays out, but the warning signs are there already.