USD/CNH snaps two-day downtrend amid concerns over Yuan’s fame, PBOC moves
- USD/CNH edges higher, prints the strongest intraday gains in a week.
- Bloomberg cites early signals of Yuan’s receding popularity, China Securities Journal hints at another RRR cut during 2021.
- Sour sentiment favors DXY ahead of US Retail Sales.
- Risk catalysts, Powell’s speech also important for clear direction.
USD/CNH seesaws around the intraday top, up 0.05% near 6.4785, during early Tuesday. The offshore Chinese currency (CNH) seems to ignore the government’s push to combat the pandemic’s recently negative impact amid chatters over receding popularity and calls for further actions from the People’s Bank of China (PBOC).
As per Reuters, “China's State Council pledged to prioritize employment while setting fiscal and monetary policies and urged all departments to "strengthen cross-cyclical policy adjustment.”
China’s Securities Journal said, “Another RRR cut is expected during the year, and the time point may be the fourth quarter.”
On the other hand, Bloomberg raised fears of the CNH’s dimming fame while citing the dragon nation’s crackdown on the shares. The same could be witnessed during this week’s data from a periodical joint research of the Society for Worldwide Interbank Financial Telecommunication, also known as Swift, and China’s foreign-exchange regulator. The news said, “The authorities scaled up their anti-monopoly attacks against the nation’s largest technology companies, banned profits in the after-school tutoring industry, and launched a critique of online gaming.”
“The unexpected onslaught pummeled stocks and bonds, and fueled concern global investors will trim back yuan assets in their portfolios and step back from adopting the use of yuan in international trade,” added Bloomberg.
It’s worth noting that the broad risk-off mood underpins the US Dollar Index (DXY) up 0.05% during the two-day recovery, and offers additional support to the USD/CNH pair’s corrective pullback.
Although downbeat China Retail Sales and Industrial Production recently raised fears of losing economic transition from the pandemic, the global powerhouse isn’t known to step back from using heavy weapons to rejuvenate the CNH.
For now, US Retail Sales for July, expected -0.2% versus +0.6% prior, will be the key, followed by a speech from Fed Chair Jerome Powel will be eyed for fresh impulse.
Technical analysis
USD/CNH grinds between 200-DMA and an ascending trend line from early June, respectively around 6.4850 and 6.4685.