USD/CNH seesaws around 6.7000 as PBOC struggles to impress bulls ahead of Fed Minutes, US NFP

• USD/CNH remains mildly bid while trying to stay positive for the second consecutive day.
• PBOC updates currency swap with HKMA, hopes of more funds probe the buyers.
• Headlines surrounding fresh covid fears from China join recession risk to battle the bears.
• US holiday, light calendar to restrict market moves, risk catalysts are the key.

USD/CNH takes rounds to 6.6700 while trying to defend buyers during Monday’s Asian session. The offshore China yuan (CNH) currency pair’s latest gains could also be linked to the market’s risk-off mood and a light calendar. However, the US holiday and the People’s Bank of China’s (PBOC) move appear to have challenged the momentum traders of late.

That said, the PBOC announced on Monday that it has upgraded a currency swap facility with Hong Kong to a standing swap agreement and expanded the size to 800 billion yuan ($119.40 billion) from 500 billion yuan, per Reuters.

The Chinese central bank also hinted, per China Press, to aim for a lower Loan Prime Rate (LPR).

However, news suggesting an increase in covid cases in China’s Anhui province joins Russia’s claim of having complete control over Lysychansk to weigh on the market sentiment and challenge the USD/CNH bulls.

It’s worth noting that the US PMIs triggered risk-aversion the previous day and propelled the USD/CNH prices. That said, the US ISM Manufacturing PMI for June slumped to the lowest levels in two years, to 53.0 versus 54.9 expected and 56.1 prior. The details suggested the Employment Index declined to 47.3 from 49.6 and New Orders Index fell to 49.2 from 55.1. Finally, Prices Paid Index dropped to 78.5 from 82.2, versus market forecasts of 81.0. It should be noted that the final readings of the S&P Global Manufacturing PMI for June dropped to the lowest level since July 2020, to 52.7 versus the flash estimate of 52.4 and 57 in May.

Following the data, the ANZ Bank said, “Surveyed data from both PMIs and the US ISM are all pointing to faltering orders growth, lower backlogs of work indices and softer production over the summer. It is hard to escape the growing growth pessimism, which is also fanning expectations of a peak in both inflation and central bank hawkishness.”

Looking forward, a light calendar and the US holiday could challenge the market players ahead of this week’s Federal Open Market Committee (FOMC) Minutes and the US Jobs report for June.

Technical analysis

Although the lower high since mid-June keep sellers hopeful, USD/CNH bears need validation from the monthly support line, around 6.6955 by the press time.