USD/CNH bulls attack 7.2000 as typhoon Doksuri gathers strength, US/China inflation eyed

• USD/CNH clings to mild gains during two-day winning streak.
• Fears of China typhoon Doksuri, US economic fears propel offshore China Yuan price.
• Expectations of China stimulus, consolidation ahead of US inflation add strength to corrective bounce.
• Inflation data from US, China will be crucial for clear directions.

USD/CNH prints mild gains around 7.2000 as bulls keep the reins for the second consecutive day but lack upside momentum amid early Monday in China. In doing so, the offshore Chinese Yuan (CNH) justifies the broad US Dollar rebound amid the geopolitical fears emanating from China.

That said, the US Dollar Index (DXY) registers the first daily positive in three around 102.10 as markets prepare for this week’s US inflation numbers, namely the Consumer Price Index (CPI) and Producer Price Index (PPI) for July. Also putting a floor under the USD/CNH price is the looming fear from China’s typhoon Doksuri as Reuters quotes China's Ministry of Water Resources by while suggesting a stronger response for flooding to Level III at 10 a.m. (02:00 GMT) in Inner Mongolia, Jilin and Heilongjiang. The news also mentioned that the Dragon Nation has a four-tier emergency response system, with Level I being the most urgent.

Elsewhere, the hawkish comments from Federal Reserve (Fed) Governor Michelle Bowman and the mixed US data might have helped the DXY to snap a two-day downtrend. That said, Fed’s Bowman said that the Fed should remain willing to raise the federal funds rate at a future meeting if the incoming data indicate that progress on inflation has stalled. Previously, Atlanta Federal Reserve Bank President Raphael Bostic said on Friday to Bloomberg, that the central bank is likely to keep monetary policy in a restrictive territory well into 2024. On the contrary, Chicago Fed President Austan Goolsbee stated that they should start thinking about how long to hold rates.

On the other hand, the US credit rating downgrade also bolstered the Greenback’s haven demand. That said, the US employment report posted a softer-than-expected Nonfarm Payrolls (NFP) figure of 187K, versus 185K prior (revised) and 200K market forecasts, whereas the Unemployment Rate eased to 3.5% from 3.6% expected and previous readings. Further, the Average Hourly Earnings reprinted 0.4% MoM and 4.4% YoY numbers by defying the expectations of witnessing a slight reduction in wage growth.

Even so, mildly bid S&P500 Futures and a lack of action in the US bond markets prod the USD/CNH traders ahead of the top-tier inflation data from the US and China. It should be noted, however, that China’s economic worries, despite announcing multiple stimulus measures, favor the pair buyers.

Technical analysis

USD/CNH struggles between a five-week-old descending resistance line and 50-DMA, currently between 7.1800 and 7.2000, as a looming bull cross on the MACD indicator teases the offshore Yuan bears.