USD/CNH grinds higher past 7.2800 as China PMIs fall, Fed’s move, US NFP eyed

• USD/CNH picks up bids to print three-day uptrend.
• China’s official Non-Manufacturing PMI dropped to the lowest levels since May, marked the first contraction in five monthly.
• Covid woes, hawkish Fed bets add strength to the bullish bias.
• FOMC needs to defend further rate hikes to overcome bearish expectations.

USD/CNH keeps buyers on the table for the third consecutive day to Monday, up 0.23% intraday near 7.2850 by the press time, as China’s monthly activity data disappoints the offshore Chinese yuan (CNH) buyers. Also keeping the pair buyers hopeful are the concerns surrounding covid woes in the dragon nation and the fears of the hawkish Fed move.

That said, China’s official NBS Manufacturing PMI for October dropped to 49.2 versus 50.0 expected and 50.1 prior. Further, the Non-Manufacturing PMI also slumped to 48.7 compared to 51.9 market forecasts and 50.6 previous readings. “China's factory activity unexpectedly fell in October, an official survey showed on Monday, weighed by softening global demand and strict COVID-19 restrictions, which hit production,” said Reuters following the data.

The news of Macau’s lockdown of a casino resort and fears emanating from Russia also underpin the USD/CNH upside, due to the US dollar’s safe-haven status. “Russia, which invaded Ukraine on Feb. 24, halted its role in the Black Sea deal on Saturday for an ‘indefinite term’ because it could say it could not ‘guarantee the safety of civilian ships’ traveling under the pact after an attack on its Black Sea fleet,” reported Reuters.

It’s worth noting that the US Treasury yields are directionless after a downbeat weak and the US equity future print mild losses even after Dow Jones braces for the biggest monthly jump since 1976. Further, the US Dollar Index (DXY) prints a three-day uptrend around 110.80, up 0.10% intraday by the press time.

To sum up, the USD/CNH bulls may keep the reins amid comparatively weaker fundamentals of China versus the US. Even so, the looming concerns that the Fed might discuss slowing down on the rate hikes from December seem to challenge the pair buyers of late.

Technical analysis

A one-week-old horizontal resistance area surrounding 7.3000-3040 restricts short-term USD/CNH upside.