USD: On the evening of March 16th, Europe announced that the ECB had raised all three major interest rates by 50 basis points and stressed that inflation was the biggest issue at the moment! Such an announcement greatly exceeds market expectations and provides a big clue to tonight's Fed resolution, which is to keep raising interest rates. Besides, the recent banking system risks have caused the USDX declines, making the market expectation of further appreciation of the CNH rise. If the Fed raises interest rates by 25 basis points in March, it may be difficult to reverse the "declining trend" of the USDX in recent days. Additionally, this will not only fail to ease inflationary pressures in the US but will also cause international capital outflows, exacerbating the systemic problems in the US banking sector. The systemic risk of US banking is triggered by its risk management problems. With six major central banks announcing an increase in borrowing liquidity between each other's dollars, the risk may temporarily end. Meanwhile, perhaps the US economy is in a contradictory pattern of high inflation and high interest rates, while in the long run, the US economy will eventually approach a cyclical recession, and the USDX will also enter a descending trend.

CNH: From January to February, the value added of China's national scale industries increased by 2.4% YoY, compared to 1.3% previously. The fixed asset investment (excluding farmers) grew by 5.5%, compared to 5.1% previously, while real estate development investment narrowed to 5.7%, and total retail sales of consumer goods increased by 3.5% YoY, compared to -1.8% previously. From the data, China's real estate development and sales have turned in January-February, with fixed asset investment sentiment heating up, and China's economic recovery is generally gaining momentum better than market expectations. Furthermore, the probability of the economy exceeding expectations has tremendously increased, and economic expectations that originally turned pessimistic due to the 5% policy target may be revised.

In general: The economic scissor gap between the domestic and foreign economies may maintain this year, and with the accumulation of overseas risks, Chinese assets may re-enter foreign positions, which is a long-term appreciation process for the CNH. Nonetheless, the systemic risks overseas have not been eliminated recently, the short-term USD may still be strong. In the long term, weakening is the general trend, the round of boosted USD/CNH exchange rate may provide an opportunity for foreign investors to allocate CNH assets. As China's export growth bottomed out YoY after the 2nd quarter, the CNH may appreciate more smoothly.

Referring to the daily chart, USDCNH has formed an 'M-shaped' oscillation. Now, USDCNH oscillates at the bottom of the 'M-shape' pattern without a direction to break it and runs between 6.82-6.92. However, the MACD forms a death cross with an expanding opening, suggesting a strong bearish signal and the probability of USDCNH plummeting below is increasing. Thus, the short position will be near the upper area of the channel at 6.92, which is safe to go short, while for aggressive traders, it is recommended to go short at highs.  

Trading direction: Short

Entry price: 6.9200

Target price: 6.8200

Stop loss: 7.02000

Support: 6.8500/6.8200

Resistance: 7.0000/7.0500