USD/CNH stays pressured towards 6.8750 on upbeat China trade numbers, downbeat US Dollar

• USD/CNH holds onto the previous day’s bearish bias after China trade numbers.
• China’s January–March Exports grew 8.4% YoY, Imports increased 0.2% YoY in Yuan terms.
• Broad-based US Dollar weakness, optimism from China exerts downside pressure on USD/CNH prices.

USD/CNH clings to mild losses around 6.8790 during early Thursday, extending the previous day’s downside momentum amid broad US Dollar selling and upbeat trade numbers from China, not to forget optimism surrounding the dragon nation.

It’s worth noting that China’s January–March Exports grew 8.4% YoY while Imports increased 0.2% YoY in Yuan terms. “In the first quarter, China's trade remained resilient,” said China’s Customs Department after the trade data release.

Apart from the China data, the downbeat US Dollar Index (DXY) also weighs on the USD/CNF price. That said, the US Dollar Index (DXY) struggles for clear directions around 101.50 after falling the most in three weeks the previous day. That said, downbeat US inflation data and an absence of impressive Fed Minutes could be cited as the key catalysts for the DXY's latest fall.

US Consumer Price Index (CPI) dropped to the lowest level since May 2021, to 5.0% YoY in March from 6.0% prior and versus 5.2% market forecasts. However, the annual Core CPI, namely the CPI ex Food & Energy, improved to 5.6% YoY during the said month while matching forecasts and surpassing 5.5% prior.

On the other hand, the Minutes of the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting also challenged the Fed hawks by stating that the expectations for rate hikes were scaled back due to the turmoil in the banking sector. “Several Federal Reserve policymakers last month considered pausing interest rate increases after the failure of two regional banks and a forecast from Fed staff that banking sector stress would tip the economy into recession,” mentioned Reuters.

It should be noted that the International Monetary Fund (IMF) held China’s economic forecasts for 2023 and 2024 intact but expects the dragon nation to join India to be the global economic growth engine.

Elsewhere, the odds of the People’s Bank of China’s (PBoC) sustained easy money policy is higher than the dovish Fed concerns and hence keep the USD/CNH prices directed towards the south.

Against this backdrop, S&P 500 Futures print mild gain while snapping a three-day downtrend while the US Treasury bond yields remain indecisive at the latest. That said, the US 10-year Treasury bond yields snapped a three-day uptrend with mild losses to around 3.40% while the two-year counterpart also eased to 3.96% by marking the first daily negative in five.

Moving on, risk catalysts and more clues of the US inflation will be eyed for clear directions. However, major attention should be given to the Fed talks and geopolitical/growth headlines.

Technical analysis

A 10-week-old ascending support line near 6.8745 restricts short-term USD/CNH downside.