USD/CNY: Oversold pair sees little action after PBOC's status quo rate decision
- USD/CNY lacks a clear directional bias on Monday.
- The PBOC keeps one- and five-year interest rates unchanged.
- The pair looks oversold and due for a corrective bounce.
The People's Bank of China's (PBOC) decision to keep interest rates unchanged fails to elicit a reaction from the USD/CNY pair.
The central bank retained one and five-year loan prime rates (LPR) at 3.85% and 4.65%.
A status quo decision was expected, given the recent improvement in the forward-looking economic indices. For instance, the Caixin China purchasing managers index, which focuses on small, private manufacturers, rose to a nine-year high of 53.1 in August from 52.8 in July.
As such, the CNY hasn't seen notable moves since the rate decision. The USD/CNY pair is trading in the sideways manner near 6.7636 at press time. The pair has declined by over 5% since topping out at 7.1766 in May.
The 14-day relative strength index is hovering below 30 or in the oversold region for the fourth straight week. Therefore, a corrective bounce could be in the offing.
The case for a bounce would strengthen if the US stocks extend the recent risk aversion, boosting the greenback's haven demand. The futures tied to the S&P 500 are currently down 0.20%.
The official data released Friday showed speculators boosted their short positions in the tech-heavy Nasdaq 100 to the highest level since 2008 int he week ended Sept. 15.
Technical levels
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
