USD/CNH extends losses post-China PMI amid US-China trade optimism
- USD/CNH holds on to weakness amid upbeat Manufacturing PMI from China.
- Nearness to phase-one deal signing and a sustained recovery in key activities offer positive sentiment surrounding Asia’s biggest economy.
- A gradual increase in PBOC fix could also be considered as the catalyst.
USD/CNH declines below 6.9800, with an intra-day low of 6.9766, after the release of China’s official PMI data during early Tuesday.
Read: China's NBS Manufacturing PMI prints above 50 for a second month in a row
China’s December month NBS Manufacturing PMI rose beyond 50.1 forecasts to reprint 50.2 mark. Given the second consecutive print above 50.00 mark, the quote ignores downbeat figures of Non-Manufacturing PMI that lagged behind 53.6 expectations and 54.4 earlier to 53.5.
The pair earlier benefited from the SCMP news that shared details of Washington trade visit by China’s Vice Premier and the key trade negotiator Liu He.
With this, Danske Bank’s call that clouds are lifting over the Chinese economy seems to prove right. The bank said, “We expect a moderate increase in the manufacturing sector driven by stimulus and easing trade tensions. The US-China trade war has calmed down again following the phase-one deal and we see a 50% chance that the US and China will strike a bigger deal in 2020 and more tariffs will be rolled back.”
Even so, the US-China political disagreements are hard to ignore. The dragon nation has already warned Trump administration to stay out of the internal matters while also criticizing the US strikes over Iraq and Syria.
However, markets have now entered the year-end holiday mood and would rather concentrate more on the trade deal optimism than to prefer risk aversion considering indirect issues.
Additionally, the People’s Bank of China (PBOC) has been inflating the fix for the onshore Chinese Yuan (CNY). The same could also be attributed to the pair’s weakness.
Technical Analysis
Unless breaking below a 200-day SMA level of 6.9630, prices are less likely to revisit early-November lows near 6.9525.