USD/CNH extends pullback from two-month top amid sluggish USD, cautious optimism
|- USD/CNH remains pressured around intraday low after snapping eight-day uptrend.
- Market sentiment dwindles amid a lack of major data/events.
- Fedspeak, stimulus hopes favor buyers versus Sino-American tussles, covid variant woes.
USD/CNH bears flirt with intraday low surrounding 6.4760, following the first negative daily closing in nine days, amid early Thursday. The cross-currency pair jumped to the highest since April 23 the previous day before snapping the monthly uptrend.
Behind the moves could be the market’s indecision amid a light calendar and mixed clues. While sentiment-positive headlines from the Fed and the US Senate favor the latest pullback in pair prices, coronavirus (COVID-19) updates and the Beijing-Washington tension lure buyers.
US Treasury Secretary Janet Yellen’s rejection of the reflation fears echoes the Fed policymakers’ latest efforts in taming the rate hike calls. The same could be reflected in the latest Fed rate hike expectations that stepped back from December 2022 a week ago to February 2023 of late.
Also favoring the risk-on mood could be comments from the US Senators suggesting increased odds favoring US President Joe Biden’s infrastructure spending passage before a two-week holiday period. Not only a slew of Democratic Senators but Mitt Romney from Republicans also sounds optimistic in the latest updates concerning Biden’s $1.2 trillion infrastructure spending plan.
Alternatively, a warning from a US Epidemiologist over the jump in the cases in this fall joins a 41% increase in Delta Plus variant cases in the UK to weigh on the risk appetite. Further, China’s warning to the US over having warships in the Taiwan Straits didn’t stop the Biden administration from restricting exports to five companies from Beijing, which in turn tests the market optimists.
Amid these plays, S&P 500 Futures print mild gains but the US Treasury yields and the US dollar index (DXY) remain sluggish by the press time.
Moving on, risk catalysts remain in the driver’s seat but the US Durable Goods Orders for May, expected 2.7% versus -1.3% prior, could offer clues to the reflation chatters and reverse USD/CNH losses if matching upbeat forecasts.
Read: US Durable Goods Orders May Preview: Is the consumer really absent?
Technical analysis
Unless declining back below the convergence of 100-day SMA and 50% Fibonacci retracement of March-May downside, around 6.4700, USD/CNH buyers stay hopeful.
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