USD/CNH refreshes three-week low around $6.3300 on softer USD

• USD/CNH drops for the fourth consecutive day to renew monthly bottom.
• Room for further easing by PBOC, strong FDI in China favor CNH buyers, Sino-American trade tussles test the pair bears.
• USD tracks softer yields amid indecision over Fed’s next move, Russia-Ukraine story.
• Fedspeak, G20 and second-tier US data in focus.

USD/CNH remains pressured around the weekly bottom, also the lowest levels since January 26, while taking rounds to $6.3300 during Thursday’s Asian session.

In doing so, the offshore Chinese yuan (CNH) prints a four-day downtrend while cheering the downbeat US dollar amid mixed concerns surrounding China.

Softer inflation and upbeat Foreign Direct Investment (FDI) figures for January enable the People’s Bank of China (PBOC) to hold onto the dovish bias. That said, China’s Consumer Price Index (CPI) and Producer Price Index (PPI) both reported downbeat figures on Wednesday while an industry report shares on Reuters hint at the further escalation in the FDI and scope for more infrastructure spending.

On the other hand, the Wall Street Journal said, “To the extent that China’s unfair, nonmarket and distortive policies and practices persist, the United States is prepared to use domestic trade tools strategically as needed in order to achieve a more level playing field with China for US workers and businesses,” 

Elsewhere, downbeat concerns by the US Federal Open Market Committee (FOMC) Minutes and doubts over de-escalation of the Russia-Ukraine tensions weigh on the US Treasury yields and stock futures, which in turn drag US Dollar Index (DXY) towards posting a three-day downtrend near 95.78.

Although optimism surrounding China’s economic performance contrasts the trade position, the widening of the Fed versus PBOC battle may help the USD/CNH bears. That said, the second-tier US economics, mainly the housing market numbers, jobless claims and Philadelphia Fed Manufacturing Survey, will join Fedspeak and updates from G20, not to forget news over Russia, to direct short-term moves.

Technical analysis

While early February’s low near $6.3490 guards short-term upside of the USD/CNH pair, a downward sloping trend line from May 31, 2021, near $6.3215 by the press time, becomes a tough nut to crack for bears.