USD/CNH bears aim to fill May 2019 upside gap as greenback turns heavy ahead of Fed

USD/CNH extends its four-day downward trajectory to 6.7682, with a 0.17% intraday loss, amid Wednesday’s initial trading on Chinese bourses. The offshore Yuan pair slumps to the lowest since May 2019 as the US dollar fails to keep the previous day’s recovery moves ahead of the key Federal Reserve (Fed) monetary policy decision.

Other than the US dollar consolidation, the mixed signals concerning the risk catalysts and a light calendar also weigh on the pair.

Following the World Trade Organization’s (WTO) verdict to term the Trump administration’s anti-trade measures on Beijing products, the US blacklists another Chinese firm that helps to build military weapons in Cambodia. On Tuesday, America canceled its ban on cotton and tomato imports from Xinjiang whereas the dragon nation extended tariff relief from the goods coming from Washington.

Also contributing to the pair’s strength could be the comments from the National Development and Reform Commission of the People's Republic of China (NDRC). The state planner recently mentioned that it approved projects worth 88.2 billion Chinese Yuan in August. The Asian major has already rolled out intentions of self-reliance and the same will be official after October month’s meeting on the five-year plans.

Elsewhere, Texas registered the biggest jump in three weeks in the daily coronavirus (COVID-19) cases with 4,816 new numbers for Tuesday. While identifying the same, China’s Global Times (GT) says, “The yuan is showing an appreciation trend as China's economy rises and the dollar is battered by coronavirus.”

Looking forward, a lack of major data/events offers a little hope for any trend change and hence the bears are likely to dominate for a while. However, the trading momentum may shrink before the US central bank announcements.

Read: September FOMC Preview: Projections, projections, projections

Technical analysis

The early-May 2019 top surrounding 6.7510 is on the bears’ radars while a falling trend line from July 22, at 6.7545 now, can question the USD/CNH sellers afterward. Meanwhile, the monthly high of 6.8610 can restrict the pair’s short-term upside.