USD/CNH bulls approach 7.2900 on softer China PMI, easing stimulus-driven optimism

USD/CNH picks up bids to extend week-start rebound despite upbeat China.
China Caixin Services PMI for August eases to 51.8 versus 54.1 previous readings.
Doubt about China’s capacity to defend economic recovery with stimulus weighs on Yuan as full markets return.
Country Garden news, China Commerce Ministry updates prod USD/CNH bulls even as US Dollar traces firmer yields.

Anil Panchal FXStreet

USD/CNH fails to justify upbeat China data while extending the week-start recovery towards 7.2900 during early Tuesday, up 0.18% intraday near 7.2880 by the press time. With this, the offshore Chinese Yuan (CNH) justifies the market’s doubts about the Dragon Nation’s capacity to defend the economic recovery from COVID-19 with a slew of stimulus measures. Also fueling the quote could be the firmer US Dollar as the Treasury bond yields improve after the previous day’s US Labor Day holiday.

That said, China’s Caixin Manufacturing PMI for August eased to 51.8 from 54.1 prior.

Elsewhere, China’s Commerce Ministry pledged to support the qualified enterprises to make good use of domestic and overseas listing, as well as bond issuance.

On Monday, China’s readiness for opening up the services industry, as well as developments of the manufacturing activities, joined a slew of measures to cut mortgage rates and infuse more liquidity to keep the Asia-Pacific markets hopeful. On the same line could be the optimism about China’s struggling reality firm Country Garden, after it managed to gain approval from creditors to delay the debt payments of around 3.9 billion Yuan ($536 million).

However, the market’s lack of confidence in the Chinese measures to defend the economy, as well as the recent Sino-American tensions over Taiwan and the US businesses’ discomfort in Beijing, prod the market’s risk-on mood and propel the USD/CNH price.

Additionally, the US Dollar Index (DXY) rebound, backed by the upbeat Treasury bond yields also underpins the USD/CNH upside.

With this, the US 10-year Treasury bond yields rose two basis points (bps) to 4.20% after a holiday-driven inaction while S&P 500 Futures print mild losses amid the market’s cautious mood as traders from the US return after a long weekend.

Looking ahead, the risk catalysts and the US Factory orders for July will be important for fresh impulse.

Technical analysis

A 13-day-old falling wedge bullish chart formation, currently between 7.2550 and 7.2910, keeps the USD/CNH buyers hopeful.

Additional important levels

Overview
Today last price	7.2882
Today Daily Change	0.0128
Today Daily Change %	0.18%
Today daily open	7.2754

Trends
Daily SMA20	7.2839
Daily SMA50	7.234
Daily SMA100	7.1377
Daily SMA200	7.0117

Levels
Previous Daily High	7.279
Previous Daily Low	7.2548
Previous Weekly High	7.3106
Previous Weekly Low	7.239
Previous Monthly High	7.3496
Previous Monthly Low	7.1452
Daily Fibonacci 38.2%	7.2697
Daily Fibonacci 61.8%	7.264
Daily Pivot Point S1	7.2605
Daily Pivot Point S2	7.2455
Daily Pivot Point S3	7.2363
Daily Pivot Point R1	7.2847
Daily Pivot Point R2	7.2939
Daily Pivot Point R3	7.3089

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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