USD/CNH rebounds from 6.6800 on upbeat Caixin Services PMI, Fed minutes in focus

• USD/CNH is attempting to recover after testing Monday’s low near 6.6800.
• The upbeat Caixin Services PMI has supported the Chinese yuan.
• The economic data has landed at 54.5, higher than the forecasts of 47.3 and the prior print of 41.4.
• Investors are awaiting the release of the Fed minutes for defining the further direction in the DXY.

The USD/CNH pair has attracted some significant bids after testing Monday’s low near 6.6800 as the release of the upbeat Caixin Services PMI data has strengthened the Chinese yuan against the greenback. The economic data has landed at 54.5, extremely higher than the forecasts of 47.3 and the prior print of 41.4.

It is worth noting that last week’s Caixin Manufacturing PMI data also landed better than the consensus. The Manufacturing PMI data landed at 51.7 vs. 50.1 the expectations and 48.1 the former release. A sheer positive deviation in the major economic indicators dictates that the Chinese economy is returning to its track after facing the headwinds of the resurgence of Covid-19.

Major Chinese cities: Shanghai and Beijing remained locked for more than two months. The lockdown curbs levied by the Chinese government to contain the pandemic had halted economic activities. However, the economy has managed to revive after the restrictions on the movement of men, materials, and machines.

On the dollar front, the US dollar index (DXY) has displayed wild gyrations at the open.  Usually, a follow-up holiday after a weekend results in higher volatility in the respective market. The DXY has managed to hold itself above the psychological support of 105.00 as investors are bracing for more volatility on the release of the Federal Open Market Committee (FOMC) minutes on Wednesday.  More clarity on the prior rate hike of 75 basis points (bps) will facilitate the market participants to make informed decisions.