USD/CNH ignores China FX intervention to print three-day uptrend near 7.3200 on economic fears

• USD/CNH remains firmer at two-week high despite latest retreat, rises for the third consecutive day.
• China economic woes exert downside pressure on Yuan, pushing Chinese banks to defend the currency in spot Forex markets.
• US soft landing concerns keep the Greenback firmer despite mixed US data, recent retreat in yields.
• US ISM Service PMIs, risk catalysts eyed for clear directions.

USD/CNH prints mild gains during a three-day winning streak surrounding 7.3200 on early Wednesday as the pair buyers cheer pessimism surrounding China and broadly firmer US Dollar to ignore Chinese forex intervention.

Reuters recently came out with the news suggesting China state banks’ mopping of offshore Yuan liquidity via selling the US Dollar onshore. The same might have triggered the offshore Chinese Yuan’s (CNH) bounce off the multi-day low of 7.3278 to 7.3170 by the press time.

However, concerns that property market restrictions in the Dragon Nation are negative, per the Chinese media, seem to keep the USD/CNH buyers hopeful.

Earlier in the day, US Commerce Secretary Gina Raimondo defended the current US tariffs on China until the four-year review is complete, which in turn joins the Taiwan concerns to highlight the Sino-American tension and fuel the offshore Chinese Yuan pair.

It’s worth mentioning that China recently announced a slew of quantitative and qualitative measures to defend the economy from losing the post-COVID-19 recovery but has gained little positive response from the market. Also pushing back the bears was the news suggesting the ability to avoid default by China’s biggest reality player Country Garden.

Talking about the US catalysts, the US Factory Orders for July dropped to the lowest since mid-2020 while posting -2.1% MoM figures versus -0.1% expectations and 2.3% previous growth. However, the orders excluding transport rose 0.8% MoM, Shipments of goods stayed firmer and inventories marked the first increase in three months.

Also, Federal Reserve (Fed) Governor Christopher Waller signaled during a CNBC interview that data will drive whether the Fed needs to lift rates again, as well as confirm whether the Fed is done raising rates. The policymaker also added, "Data is looking good for soft landing scenario,” which in turn defends the Fed’s preference for “higher for longer” rates and weighs on the sentiment.

Amid these plays, S&P 500 Futures print mild losses after a downbeat Wall Street close, lacking moves around the 4,500 threshold by the press time. On the same line, the benchmark US 10-year Treasury bond yields remain sidelined near 4.26% after rising eight basis points (bps) the previous day.

Looking ahead, the US ISM Services PMI for August, expected 52.6 versus 52.7 prior, as well as the final readings of the US S&P Global PMIs for the said month, will be important for clear directions of the USD/CNH price.

Technical analysis

USD/CNH pair’s successful upside trading beyond the three-week-old descending resistance line, close to 7.2850 by the press time, directs buyers toward the yearly high marked in August around 7.3500.