USD/CNH extends bounce off intraday low near 7.1300 on mixed China trade data

• USD/CNH picks up bids to are intraday losses, braces for three-day uptrend.
• China trade surplus ease, Exports grow, Imports ease in May.
• Sluggish markets, US Dollar’s failure to gain traction amid pre-Fed blackout limit Yuan’s moves.

USD/CNH looks set to reclaim 7.1300 as it rebounds from the intraday low amid mixed China trade numbers published early Wednesday. In doing so, the offshore China Yuan (CNH) fails to justify recently sluggish, mostly downbeat, US Dollar moves.

China’s headline Trade Balance deteriorates to $65.81 billion versus the $92.0 billion expected and $90.21 billion previous readings. That said, the Exports and Imports came in mixed with the former falling past -0.4% expected and 8.5% previous readings to -7.5% YoY whereas the latter improves to 2.3% from -0.8% market forecasts and 4.2% prior.

Also read: China’s May Trade Balance: Surplus shrinks as exports tumble

On the other hand, US Dollar Index (DXY) struggles to defend the previous day’s corrective bounce while making rounds to 104.10, mostly indecisive on a day by the press time. In doing so, the greenback’s gauge versus six major currencies suffers from downbeat market bets on the Fed’s next move amid the pre-FOMC blackout for the policymakers. That said, the interest rate futures show a nearly 15% probability of a June rate hike. The reason could be linked to downbeat United States activity data released on Monday, as well as the previously dovish comments from the Federal Reserve (Fed) Officials ahead of the pre-Fed blackout.

Elsewhere, the recently positive concerns about the US-China ties and the People’s Bank of China’s (PBoC) qualitative measures to ease credit improves the sentiment. Furthermore, the US policymakers’ ability to avoid the ‘catastrophic’ default and softer US Data allow market players to remain optimistic.

Against this backdrop, the 10-year coupons remain sluggish at around 3.67%, despite a recent corrective bounce, whereas the two-year counterpart rose a bit to 4.50% at the latest. While portraying the mood, S&P500 Futures print mild gains by tracking Wall Street’s performance.

Looking ahead, a light calendar and the pre-Fed silence can restrict the USD/CNH moves ahead of Friday’s China inflation numbers.

Technical analysis

A one-week-old ascending support line, near 7.1160 at the latest, restricts immediate downside of the USD/CNH pair even as the RSI conditions suggest a pullback from the multi-month high.