USD/CNH bounces off weekly low on USD rebound, China headlines

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  • USD/CNH recovers the previous day’s losses, refreshes intraday high.
  • US SEC tightens controls over China stock listing, Beijing passes new data privacy low.
  • Xi–Biden meet may be delayed, Chinese media highlights decline in macro indicators.
  • Market sentiment dwindles amid vaccine, tapering concerns, DXY snaps two-day downtrend.

USD/CNH takes the bids around 6.4830, up 0.12% intraday while snapping a two-day downtrend during early Tuesday. In doing so, the offshore Chinese currency (CNH) pair reacts to the recently flashed downbeat catalysts for Beijing, as well as the US Dollar Index (DXY) rebound.

The US Dollar Index (DXY) consolidates the heaviest daily losses in two months around 93.03, up 0.05% on a day, by the press time. The greenback gauge’s heavy fall on Monday could be linked to the vaccine optimism and hopes of further easy money policy, backed by downbeat August PMI data.

Recently, Reuters came out with the news suggesting that the US Securities and Exchange Commission (SEC) will increase hardships for Beijing-based companies’ listing in New York. The South China Morning Post (SCMP) also came out with the downbeat headlines for the technology companies, both from China and abroad, as it quotes experts saying, “Big Tech will be ‘a lot less powerful’ after Beijing passes sweeping new law.”

Elsewhere, China’s local media quotes industrial value-added, service industry production index, consumption, investment, etc. to mention, “The market believes that the magnitude of the fall is “exceeding expectations,” and pessimism about economic trends in the second half of the year has increased.”

Furthermore, the UK’s calling of the emergency videoconference of the Group of Seven (G7) leaders to discuss the Taliban-related issues also challenges the risk appetite.

It’s worth noting that the faster jabbing and the US Food & Drug Administration’s (FDA) approval to Moderna–BioNTech vaccine portray vaccine optimism of late. On the same line was the UK’s readiness to order 35.00 million doses of Pfizer vaccine for booster shots.

Amid these plays, the US 10-year Treasury yields gain one basis point to 1.26% whereas the S&P 500 Futures remain mildly bid at the latest.

Given the recently downbeat catalysts for China, coupled with a light calendar and the USD rebound, USD/CNH bulls may stay hopeful ahead of the Jackson Hole Symposium speeches.

Technical analysis

USD/CNH extends bounce off 50-DMA to battle the 200-DMA hurdle around 6.4825. However, bulls need a daily closing beyond 6.5000 for confirmation. In addition to the stated DMA support near 6.4750, an ascending trend line from June 10 near 6.4800 also acts as an immediate downside filter.

 

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