USD/CNH renews two-year top near 6.9400 on downbeat China data

• USD/CNH takes the bids to refresh multi-day high, prints three-day uptrend.
• China Caixin Services PMI eased to 55.00 in August.
• Escalating US-China tension, fears of global recession underpin US dollar’s safe-haven demand.
• US, Canada holiday restrict market moves, mixed US jobs report also test buyers.

USD/CNH marches to the highest levels since August 2020 as a risk-aversion wave joins softer China data to propel the offshore Chinese yuan (CNH) pair. That said, the quote rises to 6.9375 during Monday’s Asian session.

That said, China’s Caixin Services PMI dropped to 55.0 in August, versus 55.5 in prior readings. In doing so, the private activity gauge traced the major PMIs from the dragon nation that recently signaled pessimism for the world’s largest industrial player.

It should be noted that the US Dollar Index (DXY) rose to a fresh high since 2002 while piercing the 110.00 threshold, around 109.98 by the press time, as traders rush towards the risk safety amid fears of recession and the US-China tussles.

Economic slowdown woes could be linked to the recent energy crisis emanating from Europe. Group of Seven (G7) nations agreed on capping the price of Russian oil in the international markets. Following that, Moscow halted energy supplies to the European Union (EU) through Nord Stream 1 pipeline, citing a ‘leak’, during the weekend. It’s worth noting, however, that Politico ran a story mentioning that Russia’s Gazprom said on Saturday it would increase its shipments of gas to Europe via Ukraine, citing media reports. In addition to the Russia-linked energy problems and a likely recession due to the same, a halt in the US-Iran nuclear talks also amplifies oil woes for the old continent, as well as for the globe. “Iran nuclear talks stall again after latest response from Tehran,” said Bloomberg.

Elsewhere, US President Joe Biden’s administration poured cold water on the face of expectations that the US may ease/remove the Trump-era tariffs on China. “The Biden administration will allow Trump-era tariffs on hundreds of billions of dollars of Chinese merchandise imports to continue while it reviews the need for the duties,” said Bloomberg.

Furthermore, global rating agency Moody’s stated that China's property sales continue to decrease because of weak demand.

It should be noted that the US dollar lost upside momentum after Friday’s mixed US jobs report. US employment data marked mixed readings as the headline Nonfarm Payrolls (NFP) rose past 300K forecast to 315K, versus 526K prior, but the Unemployment Rate rose to 3.7% compared to 3.5% expected and prior. Further details reveal that the Average Hourly Earnings reprinted 5.2% growth for August, a bit lesser than the 5.3% market consensus. Also, Factory Orders dropped to -1.0% for July compared to 0.2% forecasts and 1.8% in previous readings.

Even so, hawkish Fed bets and the People’s Bank of China’s (PBOC) support for the easy money, not to forget covid woes in the dragon nation, keeps favoring the USD/CNH bulls.

Technical analysis

A three-week-old bullish channel, currently between 6.9140 and 6.9900, keeps USD/CNH buyers hopeful.