USD/CNH: Mildly weak near six-month low ahead of China’s key data

USD/CNH remains on the back foot while declining to 6.8770 during early Friday. The pair failed to portray the US dollar strength, like other currency pairs, amid phase-deal optimism. Traders are cautiously bullish on the Chinese currency considering the latest slew of data and the PBOC’s efforts to pump the economy with easy money policy.

The phase-one deal between the US and China cuts out the immediate risk of the trade war between the world’s two largest economies. This triggered risk-on sentiment and pleased most Asian currency buyers despite the fact that there are loopholes in the deal that could renew trade tension.

With the upbeat trade sentiment, the US 10-year treasury yields extend the previous gains to 1.825% while the S&P 500 Futures also mark 0.10% gains to 3,320.

Also contributing to the market’s risk-on could be the traders’ expectations of positive data based on the latest activity numbers from China as well as the People’s Bank of China’s (PBOC) efforts to stem the economy.

Next up on the investors’ radar are key data from China including the fourth quarter (Q4) GDP, December month Retail Sales and Industrial Production. While market forecasts 6.0% of GDP YoY, analysts at ING are a bit pessimistic and expect a 5.9% growth figure while targeting the weakest yearly growth figures since Q1 1992.

Technical Analysis

While July 2019 low near 6.8170 is the likely support for the bears to watch during further declines, a descending trend line since early December, at 6.9380 and 200-day SMA level of 6.9770 act as the key upside barriers.