- USD/CNH fades bounce off weekly low, refreshes intraday low of late.
- Evergrande remains hopeful, rating agencies mixed over China outlook.
- US stimulus, vaccine news adds to the risk-on mood post-Fed tapering hints.
- US PMIs, risk catalysts are the key for fresh impulse.
USD/CNH takes offers around $6.4665, down 0.05% on a day while declining for a third consecutive day ahead of Thursday’s European session.
The offshore Chinese currency (CNH) pair bounced off a weekly low the previous day after the US Federal Reserve (Fed) hinted at asset purchase tapering. However, the following risk-on mood exerts downside pressure on the US dollar, recalling the USD/CNH bears.
While tracing the main catalysts behind the market optimism, the optimism of the Chairman of troubled China Evergrande Group, Hui Ka Yan, joins the chatters over US stimulus could top the list. Also positive for the risk appetite were comments from the global rating agency Moody’s, citing hopes of further intervention by Chinese authorities to safeguard the money flow from Evergrande blow.
On the contrary, Fitch trims China's growth forecasts on the real estate news and updates concerning market losses due to the property-firm-led crisis challenge the USD/CNH bears.
However, an off in Japan restricts bond trading and allows markets to consolidate the US dollar’s Fed-led gains. That said, S&P 500 Futures print mild gains, up for the second day to portray the risk-on mood.
On Wednesday, the Fed matched market expectations of keeping the benchmark rate unchanged at 0.25% but the policymakers were divided over the hike, now expecting a lift from either 2022 or 2023 versus the previous support for 2023. It’s worth noting that the US central bank cut the 2021 growth forecast and remained unclear on when the rate will start rising after the tapering concludes.
Further, Chairman Jerome Powell propelled the greenback by not only signaling the positive conditions for the consolidation of the asset purchase but also the start of taper as soon as the next meeting, even if on good employment data not needing too strong figures.
Although the Evergrande news keeps USD/CNH an interesting affair for the markets, preliminary readings of the September month activity data for the US also become important to watch for fresh impulse. Further, headlines concerning covid vaccines and the West versus China story add to the watcher’s list.
Technical analysis
Failures to cross a two-month-old trend line resistance, around $6.4860 by the press time, precedes the USD/CNH pair’s drop back below 200-DMA, near $6.4725, to favor bears.
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