USD/CNH pierces 6.7000 despite upbeat China PMI, focus on US ISM PMI, recession

• USD/CNH renews intraday high while paring the previous day’s losses.
• China’s Caixin Manufacturing PMI rose past market expectations and previous readings.
• Risk-off mood underpins the US dollar’s safe-haven demand ahead of US ISM Manufacturing PMI for June.

USD/CNH struggles to justify firmer prints of the Chinese activity data during Friday’s Asian session. In doing so, the offshore Chinese yuan (CNH) pair refreshes its intraday high at 6.7025 to consolidate the biggest daily fall in a week amid a risk-off mood.

China’s Caixin Manufacturing PMI rose to 51.7 for June versus 50.1 expected and 48.1 prior. The private activity gauge tracked the official PMIs that offered positive surprises the previous day.

It’s worth noting, however, that market’s escalating economic pessimism, amid rising inflation, recalls the US dollar buyers, which in turn propel the USD/CNH prices.

While portraying the mood, the S&P 500 Futures as it drops for the fifth consecutive day to refresh the weekly low.

In addition to the risk-off mood, cautious sentiment ahead of the key US ISM Manufacturing PMI for June, expected 55.0 versus 56.1 prior, also propel the US dollar’s demand. That said, the US Dollar Index (DXY) reversed from a 12-day high to snap a two-day uptrend by closing Thursday’s trading around 104.75, near 104.80 by the press time.

On Thursday, the downbeat US personal spending and softer prints of the Fed’s preferred inflation gauge raised concerns over the health of the world’s largest economy and drowned the US dollar on Thursday. The greenback’s previous retreat could also be linked to the downbeat US Treasury yields as the benchmark 10-year bond coupons dropped below 3.0%, before bouncing off to 3.01% at the closing, to portray around 50 basis points (bps) of a fall from June’s peak.

Moving on, the US ISM Manufacturing PMI will be important for fresh impulse but major attention will be given to the economic slowdown concerns. Even so, any more weakness in the US data won’t hesitate to offer a negative month-start to the greenback.

Also read: ISM Manufacturing PMI Preview: High inflation component steal the show, boost dollar

Technical analysis

The 50-DMA level surrounding 6.7000 guards immediate upside of the USD/CNH. However, the sellers need validation from previous support line from mid-June, around 6.6740, to retake control.