USD/CNH struggles to cheer USD weakness near 6.7000 on fresh covid fears

• USD/CNH pares intraday losses around 12-day low as Beijing reports record new covid cases.
• Shanghai’s central Jingan district requires all supermarkets and shops to shut and residents to stay home until Tuesday.
• PBOC rate cut, overall reduction in mainland numbers and repeated Fedspeak seem to defend the bears.
• US inflation, PMI and growth numbers will be important for fresh impulse.

USD/CNH picks up bids to 6.7030 as fresh covid numbers renew China’s virus woes during Monday’s Asian session. Also keeping USD/CNH buyers hopeful are the concerns over the next moves concerning the Fed and the PBOC, as traders witness mixed numbers of late.

That said, China’s Beijing reports the record new covid cases on Monday, which in turn renewed expectations of fresh lockdowns and weigh on the market sentiment. ''The city reported 99 cases for Sunday, up from 61 on Saturday,'' said Bloomberg.

During the weekend, Reuters reported that Shanghai's central Jingan district, a key commercial area of the Chinese financial hub, will require all supermarkets and shops to shut and residents to stay home until at least Tuesday.

It’s worth noting, however, that the Mainland China's new coronavirus cases eased to 869 from 898 prior.

Elsewhere, the People’s Bank of China’s (PBOC) rate cut contrasts the Fed’s rate hike bias and underpins the USD/CNH bullish trajectory, even as repeated Fedspeak favoring 50 bps joined the mixed US data weighed on the quote the last week.

China’s news seems to weigh on the risk appetite but the optimists keep the reins of late. That said, the US 10-year Treasury yields rise by around 1.5 points (bps) to 2.80% whereas the S&P 500 Futures add near 1.0% gains, to 3,940 at the latest, by extending recovery from the one-year low marked during the last week.

Moving on, the US core PCE price index for April, the Fed’s preferred inflation gauge, joins the second reading of the US Q1 2022 GDP and preliminary PMIs for May to entertain traders. Also important will be the Minutes of the latest Federal Open Market Committee (FOMC), as well as signals from China, Russia and the Quad Summit in Tokyo.

Technical analysis

Although 21-DMA defends USD/CNH bulls around 6.7000, a convergence of the 10-DMA and weekly resistance line, around 6.7600, challenges the pair’s short-term recovery.