USD/CNH traces downbeat China data, USD rebound above 6.6800

• USD/CNH bounces off one-week low to print the first daily gains in three.
• China’s official PMIs for May remain pressured despite recent unlock measures.
• Yields, EU headlines favor US dollar to pare recent losses around monthly low.
• Biden-Powell meeting, second-tier US data may entertain pair traders.

USD/CNH remains mildly bid while snapping a two-day downtrend, not to forget bouncing off a weekly low, as buyers cheer downbeat China PMI data and the US dollar rebound.

China’s official activity numbers marked another contraction for May as the headline NBS Manufacturing PMI matched 49.6 forecasts, versus 47.4 prior, while the Non-Manufacturing eased to 47.8, below 50.7 market consensus.

On the other hand, the US Dollar Index (DXY) bounces off a one-month low to regain the 101.50 level, up 0.23% intraday at the latest, amid mixed sentiment and firmer US Treasury yields.

Market sentiment sours as the Eurogroup agrees on fresh sanctions on Russia, as well as comments from Ukrainian President Volodymyr Zelensky. Reuters mentioned that Ukrainian President Zelenskiy said, shortly before the EU sanctions that the situation remained ‘extremely difficult’ in the Donbas region, where Russia has focus of its military effort after failing to capture Ukraine's capital, Kyiv, in March.

Also favoring the US dollar could be statements from Fed Board of Governors member Christopher Waller. The policymaker said that he supports lifting interest rates by another 50 bps at the next several Fed meetings and that the policy rate should be above neutral by the end of the year to reduce demand, reported Reuters. 

It’s worth noting that the downbeat data and an increase in the direct trading between the Chinese yuan and Russian ruble, per Bloomberg, also weighed on the US dollar previously. Also challenging the greenback were receding odds of the Fed’s aggressive rate hikes, especially after the latest Fed Meeting Minutes.

That said, USD/CNH traders may now pay attention to the risk catalysts for fresh impulse, which in turn highlight today’s meeting of US President Joe Biden and Fed Chairman Jerome Powell, as well as headlines from Europe and Russia. Also important to watch are the second-tier activity data from the US.

Technical analysis

Unless breaking the monthly support line, around 6.6600 by the press time, USD/CNH buyers remain hopeful of crossing the 21-DMA level surrounding 6.7250.