USD/CNY eyes to snap two-week uptrend on PBOC moves, coronavirus fears ahead of US NFP
- USD/CNY consolidates the heaviest daily gains in a month around a fortnight high.
- PBOC withdraws most cash since November, odds of more easing virus-led nationwide lockdown loom.
- China to impose anti-dumping duties on US PPE from Friday, Tokyo-Washington raise concerns over Xinjiang, Hong Kong.
- US jobs report for December will be the key considering hawkish Fed.
USD/CNY bulls take a breather around $6.3800 during Friday’s Asian session, down 0.05% intraday after rising the most in a month the previous day.
The pair’s latest pullback could be linked to the softer US Treasury yields. However, headlines concerning the People’s Bank of China (PBOC), coronavirus and geopolitics keep the USD/CNY bulls hopeful during the first weekly run-up in three.
“China’s central bank injected minimal cash via short-term loans into the banking system on Friday, effectively withdrawing most of the liquidity support lent towards end-2021,” said Reuters. The news adds, “The PBOC drained 660 billion yuan on a net basis – the biggest weekly cash withdrawal since early November.”
Elsewhere, chatters over Japan and the US dislike for Human Rights violations in Xinjiang and Hong Kong seems to challenge the market sentiment and should have favored the USD/CNY buyers. On the same line could be the Global Times (GT) news citing the Ministry of Commerce while saying, “China to impose anti-dumping duties on imports of polyphenylene ether (PPE) from the US starting from Friday.”
Furthermore, escalating fears of the South African covid variant, namely Omicron, as China’s Shenzhen tightens covid controls.
That said, the latest weakness in the US Treasury yields and USD/CNY could be linked to a reduction in the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data. Also challenging the pair buyers are the recently downbeat prints of the US Factory Orders, Weekly Jobless Claims, ISM Services PMI and Good Trade Balance. It’s worth observing, hawkish Federal Open Market Committee (FOMC) Meeting Minutes and the latest Fedspeak propelled the US Treasury yields to a multi-day high previously.
Looking forward, monthly prints of US jobs report may entertain the USD/CNY traders with upbeat forecasts signaling more advances of the stated quote.
Technical analysis
A daily closing beyond a two-month-old descending trend line and 50-DMA, respectively around $6.3695 and $6.3780, keeps the USD/CNY buyers hopeful even as December’s top near $6.3845 tests the immediate upside momentum.