- USD/CNH takes offers to refresh intraday low, extends previous week pullback from monthly high.
- China Industrial Profits ease, World Bank cuts GDP forecasts.
- PBOC keeps pumping the money flow, Shenzen assesses Evergrande.
- Risk catalysts keep the driver’s seat, Fed Chair Powell will be eyed as well.
USD/CNH stays offered for the sixth consecutive day, down 0.05% intraday near $6.4565 during early Tuesday. In doing so, the offshore China Yuan (CNH) pair manages to cheer the People’s Bank of China’s (PBOC) optimism over successfully taming the Evergrande saga, despite multiple negatives from home and abroad.
Starting with the economics, China's Industrial Profits eased to 10.1% YoY versus 16.4% expected in August.
Also challenging the USD/CNH bears are the fears over Evergrande as the Shenzen government investigates the wealth management unit of Evergrande and urged to repay investors. Furthermore, challenges to the world’s second-largest economy, emanating from power cuts adds to the fears for the pair sellers of late.
The same help Goldman Sachs to cut China's 2021 GDP growth forecast while the Wall Street Journal (WSJ) hints at a new threat to the chip shortage, namely power cuts in Beijing. Following that, the World Bank said, per Reuters, “Economic recovery in east Asia and Pacific faces a setback,” while revising down China’s GDP to 8.5% for 2021.
Furthermore, the Federal Reserve (Fed) policymakers’ support for tapering and uncertainty over the US debt limits and stimulus issues also weigh on the market sentiment, underpinning the US dollar’s safe-haven demand.
Above all, the PBOC’s heavy liquidity injection, recently by 100 billion yuan, keeps the USD/CNH bears hopeful of overcoming the crisis at home.
It’s worth noting that the risk barometers, namely the stock futures and AUD/USD remain on the back foot while the US 10-year Treasury yields poke a three-month top marked the previous day at the latest.
Looking forward, the PBOC has a tough task to defy the grim concerns for China's economic growth, failing to do so will highlight the Fed tapering chatters and can recall the USD/CNH bulls.
Technical analysis
Despite failures to cross a two-month-old resistance line, around $6.4835 by the press time, USD/CNH bears struggles to conquer the 100-DMA support near $6.4535 that holds the key to a monthly low surrounding $6.4245.
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