USD/CNH: Yuan stays depressed at 13-day low despite mixed China trade data, focus on Fed signals

• USD/CNH remains firmer at two-week high despite upbeat Imports, Exports as Trade Balance deteriorates.
• Broad US Dollar strength, fears surrounding China economic growth propel offshore Yuan prices.
• Mid-tier US data, Federal Reserve policymakers speeches eyed for clear directions.

USD/CNH rises to 7.3265 while picking up bids to revisit the fortnight high marked earlier in the day after China reported mixed foreign trade data for August on early Thursday.

That said, China’s headline Trade Balance eased to $68.3 billion in August from $80.6 billion, versus $73.9 billion prior whereas the Exports and Imports for the said month improved to -8.8% YoY and -7.3% YoY respectively versus -14.5% and -12.4% priors in that order.

With this, the Chinese trade numbers join the early-week disappointment via China Caixin Services PMI, as well as the market’s lack of confidence in the Dragon Nation’s stimulus, to propel the offshore Chinese Yuan (CNH) pair. On the same line could be the US-China tension surrounding the trade conditions and Taiwan. Furthermore, the latest economics from the Eurozone and the UK, as well as statements from the European Central Bank (ECB) and the Bank of England (BoE) officials, have been portraying a downbeat economic picture of the Eurozone and Britain and contributing to the risk aversion, which in turn propels the US Dollar.

On the contrary, strong US activity and output data join the hawkish Federal Reserve (Fed) signals to highlight the US Dollar as the market’s favorite. On the same line could be the Fed’s Beige Book suggesting a soft landing in the US.

Against this backdrop, S&P 500 Futures remain pressured at the lowest level in a week, down for the fourth consecutive day while posting mild losses around 4,468 by the press time. That said, the US 10-year Treasury bond yields seesaw near the two-week high registered the previous day around 4.30%, near 4.29% at the latest, whereas the two-year counterpart prints the first daily loss in four by retreating from the weekly top to 5.01% as we write. With this, the US Dollar Index (DXY) struggled at the highest level in six months, indecisive at 104.85 at the latest.

Having witnessed another downbeat clue for China's economy, the USD/CNH traders should wait for the second-tier US employment and activity data, as well as speeches from a slew of Fed policymakers for clear directions.

Technical analysis

USD/CNH remains on the way to refreshing the yearly top marked in August surrounding 7.3500 unless it drops below a three-week-long previous resistance line of near 7.2830.