USD/CNH marches beyond 6.7700 on PBOC MLF rate cut, recession woes ahead of Fed Minutes

• USD/CNH takes the bids to poke one-week high, prints the biggest daily gains in a month.
• PBOC surprised markets with 0.10% one-year MLF rate cut, China data dump failed to push back recession fears.
• Shanghai reopens all schooling formats from September 01 after multiple days of covid-led off.
• Fed Minutes, news concerning the Sino-American ties are also important for clear directions.

USD/CNH takes the bids to refresh the daily high, also renewing the weekly peak, near 6.7710 heading into Monday’s European session. The offshore Chinese yuan (CNH) pair’s latest gains could be linked to the downbeat China data and a rate cut from the People’s Bank of China (PBOC). Headlines surrounding the US-China tussles and a lack of loan demand also appear to propel the pair prices of late.

China’s Retail Sales eased to 2.7% YoY in July versus 5.0% expected and 3.1% prior whereas Industrial Production (IP) edged lower to 3.8% during the stated month, from 3.9% prior and 4.6% market forecasts. Earlier in the day, the People’s Bank of China (PBOC) cut the one-year medium-term lending facility (MLF) rates by 10 basis points (bps) and tried to push back the bears.

It’s worth noting that the early-day data dump also revealed a lack of demand for loans, which in turn amplified the recession woes even as the PBOC tried to placate bears.

On the same line was news concerning the increased numbers of US lawmakers visiting Taiwan after House Speaker Nancy Pelosi’s visit.

On the other hand, headlines suggesting improved coronavirus conditions in China's financial hub Shanghai and the resumption of the Russian bonds’ trading on Wall Street should have favored the risk appetite, but could not. Furthermore, hopes of a probable meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, as signaled by the Wall Street Journal (WSJ), could favor the risk-on mood.

Elsewhere, hawkish Fedspeak, despite the latest softness in the US inflation numbers, appears to have favored the US dollar ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting minutes.

For today, Empire State Manufacturing Index for August, expected 8.5 versus 1.1 prior, may offer immediate directions to the USD/CNH pair.

Technical analysis

A successful upside break of the two-week-old resistance line, now support near 6.7490, directs USD/CNH bulls towards the monthly high of 6.7955.