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USD/CNH refreshes 4.5-month low as bears cheer US-China trade news

  • USD/CNH registers decline for the fifth consecutive day.
  • The US dollar bears the burden of NFP, the absence of US-Iran war and US-China trade optimism.
  • Expectations of Beijing’s recovery add to the pair’s weakness.

USD/CNH extends losses to 6.9100, after diving to the lowest since early-August, during early Monday. The pair seems to have reacted to the US-China trade positive news off-late to extend the post-NFP downside.

The US dollar index (DXY) snapped back from a two-week high on Friday as the US employment data disappointed the greenback buyers. The headline NFP lagged behind 164K forecast to 145K whereas the Average Hourly Earnings also weakened from 3.1% expected and prior to 2.9%.

Also contributing to the greenback’s weakness is the lack of safe-haven buying amid the absence of US-Iran war. Iran’s repeated minor attacks on the US forces in Iraq and the US sanctions on the key diplomats from Tehran seem to have a little impact on the market’s risk tone as neither side is showing signs of the war.

On the contrary, risk-on seems to have been favored off-late amid the US-China trade headlines. Chinese delegates will reach Washington on Wednesday and will have the phase-one deal signed. They will also discuss phase-two and the US-China semi-annual talks are to be resumed too. This shows the trade tension that hovered everyone last-year might recede during 2020.

Amid the trade optimism, the pair seems to ignore the recent story suggesting further easy money policy from the People’s Bank of China (PBOC).

While portraying the risk-on, Asian stocks are on the front foot despite Japan’s off while S&P 500 Futures register 0.20% gains to 3,272.

Given the absence of major data/events, markets will keep eyes on trade/political headlines for fresh impulse.

Technical Analysis

Pair’s sustained trading below an ascending trend line since March 2018, at 6.9860 now, signal the Bear’s dominance. July 2019 low near 6.8160 seems the next strong support to watch.

 

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