USD/CNH snaps two-day declines to 6.9750 amid fresh fears for China
- USD/CNH reversed the recent losses as trade/growth worries weigh on the previous risk reset.
- China’s Q1 GDP could flash fresh 30-year low, the US keeps trade tariffs intact despite the coronavirus outbreak.
- US GDP, trade/political headlines will be the key to watch.
USD/CNH takes the bids to 6.9770, +0.13%, during the early trading session on Thursday. In doing so, the pair bucks the previous two-day declines as risk-off regains traction. Adding to the same could be the latest forecasts concerning China’s economic losses due to the coronavirus epidemic as well as the US stand against the dragon nation.
While 170 deaths and 7,711 confirmed cases make coronavirus a bigger challenge to China than its counterpart in 2002/03 outbreak, the SARS. The latest comments a government economist, shared by Reuters, suggest that the dragon nation is up for flashing the lowest growth figures in 20 years during the first quarter of 2020.
Earlier during the day, the market’s trade sentiment reacted to the global economies and businesses cutting links with China. Also contributing to the risk-off was the US firm stand to keep tariffs on imports of Chinese products despite negative impacts of coronavirus on the world’s second-largest economy.
That said, the US 10-year treasury yields seesaw near the lowest in 16-weeks to 1.58% whereas the S&P 500 Futures also mark 0.30% losses to 3,262 by the press time.
Moving on, traders will now keep eyes on the headlines concerning China while the preliminary readings of the US Q4 GDP will entertain markets afterward. “The advance reading on US Q4 GDP growth is expected to be 2.1% q/q annualized, very similar to Q3 but with a weaker consumer. Business investment is expected to remain weak, while net exports should be boosted by a slide in imports as tariff anticipation continues to drive volatility in this sector,” says Westpac ahead of the US data.
50-day and 200-day SMAs near 6.9770 and 6.9855 limit the pair’s near-term upside, which in turn increases the odds of a pullback towards 21-day SMA near 6.9270.