USD/CNH pares weekly gains near 7.1400 amid mixed concerns over Covid, China GDP

• USD/CNH takes offers to refresh intraday low, stays on the way to second weekly gain.
• Chinese policymakers face criticism over zero-covid policy amid strong virus numbers.
• Nomura cuts China’s Gross Domestic Product (GDP) forecasts for 2022, 2023.
• FOMC Minutes, downbeat US PMIs adds strength to the pullback moves.

USD/CNH cheers softer US Dollar, as well as cautious optimism in the market, while printing daily losses around 7.1400 during early Thursday. In doing so, the offshore Chinese Yuan (CNH) pair drops 0.10% intraday while consolidating the second weekly gain in a row.

While broad USD weakness is the key catalyst for the USD/CNH pair’s latest losses, Chinese policymakers’ rush towards easing the virus-led activity restrictions, despite record high Covid numbers, also weighed on the quote.

Bloomberg said that China’s daily Covid infections climbed to a record high, exceeding the previous peak in April, as it battles an outbreak that has grown since the country adopted a more targeted approach to containing the virus. The news also added that the country reported 29,754 new cases for Wednesday, more than the 28,973 infections recorded in mid-April when the financial hub of Shanghai was in the midst of a grueling two-month lockdown that saw residents struggle to access food and medical services. Even so, Chinese policymakers are warned about altering the zero-covid policy in the latest mediate coverage.

Elsewhere, Nomura lowers China's GDP growth forecasts for 2022 and 2023 to 2.8% and 4.0% versus 2.9% and 4.3% previous projections in that order.

Also, hopes of Chinese government measures to ease the pains of real-estate and financial sector, as well as chatters surrounding a cut to the People’s Bank of China’s (PBOC) Reserve Requirement Ratio, seemed to have favored the risk-on mood and the USD/CNH bears too.

On the other hand, the latest Federal Open Market Committee (FOMC) Meeting Minutes signaled that the policymakers discussed the need of slowing down the interest rate hikes. Additionally weighing on the Greenback were chatters over the “sufficiently restrictive” level of the Federal Reserve’s (Fed) interest rates, as indicated in the Fed Minutes.

Furthermore, mostly downbeat US statistics offered an extra favor to the USD/CNH bears. The preliminary readings of the US S&P Global Manufacturing PMI for November eased to 47.6 from 50.0 expected and 50.4 prior whereas the Services PMI also followed the suit while declining to 46.1 compared to 47.9 market forecasts and 47.8 previous readings. Overall, the S&P Global Composite PMI for November dropped to 46.3 versus 47.7 expected and 48.2 prior readouts.

That said, the United States Weekly Jobless Claims rose the most since June, to 240K versus 225K expected and 223K prior, which in turn favored the sentiment and drowned the US Dollar.

However, strong prints of the US Durable Goods Orders, up 1.0% in October versus 0.4% marked expectations and downwardly revised 0.3% prior, join China’s covid woes to challenge the USD/CNH bears amid a sluggish session.

It’s worth noting that Thanksgiving holiday in the US and a light calendar elsewhere may allow the USD/CNH pair to reverse the latest losses.

Technical analysis

USD/CNH remains sidelined between the 21-day Exponential Moving Average (EMA) and the 50-day EMA, respectively near 7.1660 and 7.1330.