USD/CNH snaps three-day downtrend near 6.7600 on softer China data, covid concerns

• USD/CNH rebounds from one-week low, picks up bids to refresh daily top.
• China New Home Prices drop for the first time in 2022, covid cases, virus-led deaths increase Mainland.
• Sour sentiment, hawkish Fedspeak underpins the US dollar’s corrective pullback.
• Second-tier US data, qualitative factors will be important for fresh impulse.

USD/CNH takes the bids to renew intraday high around 6.7600 as the US dollar pares recent gains during the sluggish Asian session. Also supporting the offshore Chinese yuan (CNH) pair are the recently flashed downbeat housing numbers at home, as well as hawkish comments from the US Federal Reserve (Fed) policymaker.

China House Price Index for April eased to 0.7% versus 1.5%. “China's new home prices in April fell for the first time month-on-month since December, official data showed on Wednesday, depressed by strict COVID-19 lockdowns in many cities, despite more easing steps aimed at supporting demand,” said Reuters after the data release.

Furthermore, news from Reuters that foreign investors cut holdings of Chinese Yuan bonds for third straight month in April also seems to weigh on the CNH prices.

Elsewhere, an increase in Mainland China’s daily covid cases, to 1,305 from 1,100 reported the previous day. It’s worth noting that the virus-led death count also rose to three from one, per the latest readings from Reuters.

On the other hand, comments from Chicago Fed President Charles Evans seem to have weighed on the market’s mood by renewing fears of a faster rate hike as the policymaker said, “(the Fed) Should raise rates to 2.25%-2.5% neutral range 'expeditiously'.” On Tuesday, Fed Chair Jerome Powell and a generally-hawkish St Louis Fed President James Bullard pushed for a 50 bps rate hike and weighed on the USD.

Previously, downbeat comments from the Fed policymakers and hopes of easing covid conditions in China seemed to have favored the USD/CNH bears.

Looking ahead, US Housing Starts and Building Permits for April will join Fedspeak to direct short-term USD/CNH moves. Additionally, covid headlines and news concerning Russia will also be important to watch.

Technical analysis

Although 10-day EMA triggered the USD/CNH pair’s recovery moves, around 6.7440 by the press time, the previous support line from April 19 challenges the immediate upside near 6.7920.