USDCNH rebounds from six-week low on downbeat China data, Covid woes

• USDCNH picks up bids to snap three-day downtrend at the lowest level in more than a month.
• China Retail Sales slump to print contraction, Industrial Production eased in October.
• China’s coronavirus numbers keep rising, doubled in Guangzhou.
• Fedspeak, firmer yields also underpin recovery moves amid the sluggish session.

USDCNH renews its intraday high near 7.0555 while printing the first daily gains in four amid downbeat China data and the coronavirus fears. Also likely to have weighed the offshore Chinese Yuan (CNH) is the market’s dicey mood and mixed comments from the US Federal Reserve (Fed) officials.

That said, China’s Retail Sales marked the lowest print in five months, to -0.5% YoY versus 1.0% expected and 2.5% prior, whereas the Industrial Production (IP) also dropped to 5.0% growth versus 5.2% market forecasts and 6.3% previous readings during October.

Also read: China’s October Retail Sales and Industrial Output disappoint

Elsewhere, the recently firmer Covid numbers from the dragon nation also propel the USDCNH price as Guangzhou reports 5,124 new local Covid-19 cases as of 00:00 November 15, 2022. With this, the daily numbers turn out to be double what they were over the weekend.

On the other hand, an absence of positive headlines from the first face-to-face meeting between US President Joe Biden and his Chinese counterpart Xi Jinping weighs on the market sentiment and favors the pair buyers.

Furthermore, the latest commentary from the US Federal Reserve (Fed) officials renews inflation fears and underpins the USDCNH upside. Recently, the Fed’s Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, Michael Barr mentioned that the inflation is too high. Before that, Vice-Chair Lael Brainard favored a 50 bps rate hike but also stated, “We have additional work to do.” Earlier on Monday, Federal Reserve Governor Christopher Waller also promoted the ideal of a 0.50% rate hike while also warning against the market’s perception of the pivot.

While portraying the mood, S&P 500 Futures print mild gains but the US 10-year Treasury yields grind higher around 3.87%, which in turn underpins the US Dollar Index (DXY) recovery, up 0.08% intraday near 107.00 by the press time.

Looking forward, the risk catalysts are likely to direct the short-term USDCNH moves. However, major attention will be given to the US Producer Price Index (PPI) for October, expected at 8.3% YoY versus 8.5% prior, as well as the US Retail Sales for the said month, for clear directions.

Technical analysis

Despite the latest pullback, the 100-DMA hurdle surrounding 7.1455-60 challenges USDCNH bulls.