- USD/CNH drops to more than one-week low, stays pressured near intraday bottom of late.
- PBoC keeps defending Yuan with heavy OMOs, pours cold water on expectations of witnessing strong USD/CNY fix.
- Comparatively better US PMIs put floor under US Dollar price but pre-Fed positioning allow offshore Chinese Yuan to remain firmer.
- US CB Consumer Confidence eyed ahead of Wednesday’s FOMC.
USD/CNH stands on the slippery ground as it drops to the lowest levels in seven days to around 7.1500 during early Tuesday, close to 7.1600 by the press time. In doing so, the offshore Chinese Yuan (CNH) justifies the People’s Bank of China’s (PBoC) efforts to defend the domestic currency, as well as cheer the talks about more stimulus from the dragon nation.
The PBoC marked another disappointment for the USD/CNY forecasters by fixing the reference rate at 7.1406 versus 7.1451 prior and 7.1860 market forecasts. It’s worth noting that the USD/CNY closed near 7.1882 the previous day. While defending the USD/CNY fix, the Chinese central bank announced a 3-month bills swap worth five billion Yuan while marking a net 29 billion Yuan injection by the Open Market Operations (OMOs).
Elsewhere, the Chinese media conveyed details of the Communist Party's Politburo meeting on Monday that cited new difficulties and challenges for the economy while also showing the policymakers’ readiness for prudent monetary and fiscal policies. It’s worth observing, however, that the policymakers pledged measures to step up support for the economy amid a flagging post-COVID recovery, reported Reuters.
On the same line, China state planner National Development and Reform Commission (NDRC) issued a notice to promote the high-quality development of private investment. That said, NDRC also pledged encouragement of participation in some projects of transport, water and clean energy, as well as in new infrastructure and modern agriculture.
Amid these plays, stocks in China rally but the US stock futures print mild losses while the Treasury bond yields dribble and trigger the US Dollar’s retreat.
That said, the US Dollar Index (DXY) refreshed a two-week high near 101.40 during a five-day uptrend, mildly bid near 101.45 by the press time, amid comparatively better PMI data and upbeat yields. That said, the first readings of the US S&P Global Manufacturing PMI for July improved to 49.0 from 46.3 prior and 46.4 market forecasts while the Services PMI eased to 52.4 versus 54.0 expected and 54.4 previous readings. With this, the Composite PMI edged lower to 52.0 from 53.2 prior and 53.1 market forecasts. However, Chicago Fed National Activity Index for June slid to -0.32 from -0.28 prior (revised) and 0.03 market forecasts.
Moving on, China stimulus news and the PBoC efforts may keep weighing on the USD/CNH price but the US CB Consumer Confidence for July, expected at 112.1 versus 109.70 prior, and Wednesday’s Federal Open Market Committee (FOMC) monetary policy meeting announcements are crucial to watch for clear directions.
Technical analysis
A convergence of the five-week-old ascending trend line joins the 50-DMA to restrict the immediate USD/CNH downside near 7.1600.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
![EUR/USD stays below 1.1100, looks to post weekly losses](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/european-euro-coin-on-top-of-american-dollar-bill-11292130_XtraSmall.jpg)
EUR/USD stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
![GBP/USD struggles to find a foothold, trades near 1.3150](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/GBPUSD/iStock-157771037_XtraSmall.jpg)
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
![Gold retreats toward $2,500 ahead of the weekend](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/gold-bars-50657756_XtraSmall.jpg)
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
![Week ahead – Investors brace for NFP amid Fed rate cut speculation](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Employment/NFP/america-back-to-work-gm178972493-25143312_XtraSmall.jpg)
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
![Easing Eurozone inflation to back an ECB rate cut in September](https://editorial.fxstreet.com/images/Macroeconomics/Countries/Europe/Eurozone_countries/Eurozone/eu-flags-flying-at-the-european-commission-building-brussels-belgium-24759579_XtraSmall.jpg)
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.