|

USD/CNH marches beyond 7.2700 on mixed China PMI, US PCE Inflation eyed

  • USD/CNH grinds higher around the yearly top after mixed China official PMIs for June.
  • China NBS Manufacturing PMI matches upbeat forecasts but stays below 50.0, Non-Manufacturing PMI improves.
  • PBoC keeps defending Yuan but fails so far amid hawkish Fed talks, upbeat US data.
  • Fed’s preferred inflation gauge, headlines surrounding US-China ties eyed for intraday directions.

USD/CNH picks up bids to print mild gains around the yearly top marked the previous day as China’s headline PMIs flash mixed outcome for June on early Friday. With this, the offshore Chinese Yuan (CNH) pair remains firmer for the third consecutive day to around 7.2720 by the press time.

China’s headline NBS Manufacturing PMI matches 49.0 market forecasts in June versus 48.8 expected while the Non-Manufacturing PMI rose past 50.2 analysts’ estimations to 53.2, compared to 54.5 previous readings, during the said month.

Apart from the PMIs, the USD/CNH pair also justifies the market’s lack of confidence in the People’s Bank of China’s (PBoC) defense of the onshore Chinese Yuan (CNY) via daily fix and open market operations.  That said, the PBoC keeps fueling USD/CNY fix, making it the highest since November 2022 at the latest.

On the contrary, hawkish Federal Reserve (Fed) comments and upbeat US data keeps the US Dollar firmer.

Fed Chair Jerome Powell spoke at the Fourth Conference on Financial Stability hosted by the Bank of Spain, in Madrid, while saying, “A strong majority of Fed policymakers expect two or more rate hikes by year-end.” Additionally, Atlanta Federal Reserve President Raphael Bostic told reporters regarding future rate increases, as reported by Reuters, that he doesn’t see as much urgency to move as stated by others, including Chairman Jerome Powell. The policymaker, however, recently took a U-turn while saying, “I think it's unambiguous that inflation has fallen considerably."

On Thursday, the US Gross Domestic Product (GDP) Annualized, mostly known as the Real GDP, grew at the 2.0% rate for the first quarter (Q1) of 2023 versus the 1.3% initial estimation. Further, the US Weekly Initial Jobless Claims slumped to 239K for the week ended on June 23 compared to 265K expected and revised prior. However, the Personal Consumption Expenditure (PCE) Price for Q1 2023 eased to 4.1% QoQ from 4.2% expected and prior whereas the Pending Home Sales slumped to -2.7% MoM for May compared to 0.2% expected and -0.4% prior (revised).

On a different page, mixed headlines about the US-China ties also propel the USD/CNH price as US Treasury Secretary Janet Yellen ‘hopes’ to visit China to re-establish contacts but also showed readiness to take actions to protect national security interests even at an economic cost.

While portraying the mood, Wall Street closed positive but the US 10-year and two-year Treasury bond yields also rallied while the US Dollar Index (DXY) refreshed its weekly top before retreating to 103.40. It should be noted that the S&P500 Futures print mild gains by the press time.

Having witnessed the initial market reaction to China’s official activity data for June, the USD/CNH pair traders will concentrate on the risk catalysts ahead of the Federal Reserve’s (Fed) favorite inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index, for May for clear directions. Also important to watch will be the news concerning the US-China ties amid the latest geopolitical jitters.

Technical analysis

Rising wedge at multi-month top challenges USD/CNH bulls unless the quote defies the bearish chart formation by crossing the 7.2800 hurdle. That said, a downside break of the 7.2400 support will confirm the wedge pattern suggesting the downturn for theoretical target of 7.0670.

Additional important levels

Overview
Today last price7.2672
Today Daily Change-0.0016
Today Daily Change %-0.02%
Today daily open7.2688
 
Trends
Daily SMA207.172
Daily SMA507.0628
Daily SMA1006.9769
Daily SMA2007.0008
 
Levels
Previous Daily High7.277
Previous Daily Low7.2334
Previous Weekly High7.2286
Previous Weekly Low7.128
Previous Monthly High7.1344
Previous Monthly Low6.8962
Daily Fibonacci 38.2%7.2604
Daily Fibonacci 61.8%7.2501
Daily Pivot Point S17.2425
Daily Pivot Point S27.2162
Daily Pivot Point S37.1989
Daily Pivot Point R17.2861
Daily Pivot Point R27.3034
Daily Pivot Point R37.3297

Author

Anil Panchal

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.

More from Anil Panchal
Share:

Editor's Picks

GBP/USD gains as easing Fed hike bets weigh on US Dollar

GBP/USD continues its winning streak for the ninth consecutive day, trading around 1.3390 during the Asian hours on Tuesday. The currency pair rises as the US Dollar faces headwinds as market participants scale back expectations for Federal Reserve rate hikes this month and in September. 

EUR/USD extends the range play above 1.1400 as Hormuz risks support USD

The EUR/USD pair extends its sideways consolidative price move during the Asian session on Tuesday, though it manages to hold comfortably above the 1.1400 mark. Moreover, spot prices remain well within striking distance of a nearly two-week high, touched last Thursday.

Gold sticks to losses as inflation fears lift US bond yields and USD amid Hormuz risks

Gold maintains its offered tone heading into the European session, albeit it holds above the $4,100 mark. Crude oil prices edge higher amid renewed tensions in the Strait of Hormuz, reviving inflationary concerns. This, in turn, triggers a fresh leg up in US Treasury bond yields, offering some support to the US Dollar, and weighing on the non-yielding yellow metal for the second straight day.

Bitcoin loses steam around $63,000 – DeFi tokens rally

Bitcoin sustains above $63,000 at press time on Tuesday, upholding a streak of six consecutive days of gains despite Strategy selling 3,588 BTC on Monday. The broader crypto market sentiment holds while DeFi tokens such as DeXe and LayerZero emerge as top gainers over the last 24 hours.

Bye, forward guidance: How to trade when central banks choose silence
Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance, arguing that the current world demands more flexibility.
Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.