The People’s Bank of China (PBOC) lowered the loan prime rate (LPR) to 4.20%, while the market analysts expected the further decrease to 4.15%, from the previous 4.25%. The USDCNH has failed to react to this surprise as the price action approaches intraday support.
While the PBOC decreased the 1-year LPR rate, the 5-year LPR has remained unchanged at 4.85%. The LPR indicates at what price are lenders charging clients for new loans.
Commenting on the decision, ANZ Bank China’s market economist Zhaopeng Xing noted that the decision is not in line with the market expectations.
“The PBOC intends to reserve room for future headwinds,” added Xing.
Following the creation of a record high of 7.1979, which also represents the 127.2% Fibonacci extension of 2016 high to 2018 low, the bears have managed to push the USDCNH price slightly lower.
The price action is currently trapped within a symmetrical triangle, with 7.0550 (support) and 7.1550 (resistance) being two levels to watch out for in the coming days.