USD/CNH slides from six-month high to under-7.1100 on upbeat China Caixin PMI

• USD/CNH takes offers to refresh intraday low, prints the first daily loss in four at multi-day top.
• China Caixin Manufacturing PMI prints the first above 50.0 print in three months.
• Upbeat sentiment, easing hawkish Fed bets and the mixed US data also exert downside pressure on Chinese Yuan pair.
• US employment clues, Senate voting on debt ceiling eyed for clear directions.

USD/CNH recalls the sellers after their two-day absence as China’s private manufacturing gauge prints welcome figures during early Thursday. Adding strength to the offshore Chinese Yuan is the improvement in the risk profile after the US policymakers inch closer to avoiding the default. That said, the recent shift in the Fed bias and mixed US data also allow the quote to retreat from a six-month high marked the previous day.

China’s Caixin Manufacturing PMI rose beyond 50.0 level for the first time in three months while suggesting an increase in activities. That said, the private manufacturing gauge rose to 50.9 versus 49.5 expected and prior. 

Also read: Caixin China Manufacturing PMI (May): 50.9, beats 49.5 prior and 49.5 expected, AUD bid

On the other hand, US JOLTS Job Openings rose to 10.103M in April versus 9.375M expected and 9.745M prior whereas Chicago Purchasing Managers’ Index dropped to 40.4 for May from 48.6 prior and 47.0 market forecasts. Earlier in the week, the US consumer sentiment gauge improved but the details were unimpressive.

Not only the mixed US data but comments from multiple Fed speakers also raised doubts on the US central bank’s ability to lift the rates further, which in turn allowed Wall Street Journal’s (WSJ) Nick Timiraos to suggest that the Federal Open Market Committee (FOMC) is likely to hold interest rates steady in June.

Talking about the risk, the US Republican-controlled House of Representatives recently passed the debt-ceiling bill and favored the market’s optimism as the ruling Democrats dominate in the Senate and can easily avoid the default now. “The Republican-controlled House voted 314-117 to send the legislation to the Senate, which must enact the measure and get it to President Joe Biden's desk before a Monday deadline, when the federal government is expected to run out of money to pay its bills,” said Reuters.

Having witnessing these catalysts, the USD/CNH pair traders should pay attention to the US ADP Employment Change, ISM Manufacturing PMI and S&P Global PMIs for May for fresh impulse.

Technical analysis

Although overbought RSI joined upbeat China data to trigger the USD/CNH pair’s pullback moves, a one-week-old ascending support line near 7.0950 puts a short-term floor under the offshore Yuan prices.