USDCNH slides towards 7.3100 on alleged PBOC meddling, US NFP eyed

USDCNH takes offers to refresh the intraday low near 7.3130 amid the chatters over the People’s Bank of China’s (PBOC) market meddling on early Friday. In doing so, the offshore Chinese Yuan (CNH) pair cheers the US dollar’s pullback amid the cautious mood ahead of the key US jobs report.

As per the latest calculation from Reuters, a net 737 billion Yuan for the week via open market operations, the biggest weekly cash withdrawal in nearly nine months.

It should be noted, however, that the recently escalating covid woes and the US Federal Reserve’s (Fed) hawkish bias keeps the USDCNH bears off the table. That said, China reported 4,045 new COVID-19 infections on November 3, versus 3,372 new cases reported a day earlier, per the latest data from Reuters.

On the other hand, mixed US data and US inflation expectations could also be linked to the USDCNH pair’s latest weakness. Talking about the data, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior. On the other hand, US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, dropped to the lowest levels since October 19 and 13 in that order.

Additionally, mildly positive Asia-Pacific stocks, led by Hang Seng's 5.75% run-up, keeps the USDCNH bears hopeful. It should be noted that the MSCI's Index of Asia-Pacific shares outside Japan rises more than 1.0% whereas Japan's Nikkei drops 1.85% on a day at the latest.

However, fears of higher rates and economic slowdown, as conveyed by policymakers from the Bank of England (BOE), the US Federal Reserve (Fed) and the European Central Bank (ECB), seemed to keep the US dollar on the front foot. That said, the US Dollar Index (DXY) retreats to 112.78 from a three-week high by the press time.

Having witnessed a lackluster session ahead of the US employment report for October, USDCNH traders may closely watch the US jobs report, especially the headline Nonfarm Payrolls (NFP) for clear directions. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. That said, the downbeat forecasts for the scheduled statistics signal a corrective move from the key support line in case of a surprise.

Also read: US October Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

Technical analysis

USDCNH pullback remains elusive unless breaking the monthly support line, around 7.2230 by the press time. That said, the pair’s recovery need s validation from an eight-day-old descending resistance line, around 7.3470.