USD/CNH drops further below 6.9800 amid risk reset
- USD/CNH extends the previous day’s losses.
- China’s readiness to confront the epidemic, further development in finding the cure triggers pullback in trade sentiment.
- A lack of major data may keep the latest trend ahead of the Fed Chair Powell’s testimony.
USD/CNH declines to 6.9775 after flashing the intra-day low of 6.9757 as the Chinese markets open for trading on Tuesday. Even if the broad risk-off and US dollar strength keep the pair buyers happy, the latest efforts from China and the reopening of factories could have exerted downside pressure on the quote.
While reopening some of the factories in Beijing as well as strong CPI numbers contributed to the pair’s pullback on Monday, the Global Times’ headlines seem to have recently weighed on the quote. The latest gaining attention says, “Scientists in Shanghai recently have isolated strains of the novel coronavirus, which experts said will boost the development of vaccine and medicine against the virus. The Chinese media earlier reiterated Beijing’s readiness to respect the phase-one deal terms despite the coronavirus epidemic.
Read: Coronavirus update: Death toll tops 1000
Further to the pair’s fall could be the latest round of 100 billion Chinese yuan liquidity infusion, totaling 380 billion, ever since the Chinese markets open before a fortnight.
With this, the US 10-year treasury yields recover to 1.56% whereas S&P 500 Futures also register a 0.30% rise to 3,361 by the press time.
While coronavirus headlines will be the key to watch, traders will be more interested in the US Federal Reserve Jerome Powell’s testimony. The Fed Chair has been pressured by US President Donald Trump to cut benchmark interest rates. His latest comments mention that “we should have a lower Fed rate now. Not happy with Fed Chair Powell.”
Even so, the Fed Chair is likely to reiterate optimism surrounding the US economy, based on the latest fundamentals, but a serious call to coronavirus impact could drag the pair further towards the south.
50-day SMA near 6.9700 acts as the immediate support holding keys for the further declines to the monthly low near 6.9570 whereas a 100-day SMA level of 7.0180 becomes the key resistance above 7.0000 nearby upside barrier.