USD/CNH retreats toward 7.2700 on China upbeat economic data, reduces RRR

USD/CNH retreats toward 7.2700 on China upbeat economic data, reduces RRR
  • Friday, 15 September 2023 | 3:20 GMT
  • USD/CNH retraces the previous day’s gains on China’s positive economic data.
  • PBoC has reduced the Reserve Requirement Ratio by 25 bps.
  • US Dollar (USD) is trading near its six-month high after the US positive economic data.

During the Asian session on Friday, USD/CNH is retracing from its prior day’s gains and is currently trading lower around 7.2700. This downward movement is attributed to the release of positive macroeconomic data from China.

The National Bureau of Statistics (NBS) in China has announced that year-over-year Retail Sales have shown a significant improvement, registering a 4.6% increase in August. This figure surpasses expectations, which were at 3.0%, and represents an improvement from the previous month’s reading of 2.5%. Furthermore, Industrial Production (YoY) has also outperformed expectations, indicating a growth rate of 4.5% in August, up from a 3.7% rise observed in July.

The USD/CNH pair is facing downward pressure as China’s positive economic indicators and additional stimulus measures contribute to an optimistic market sentiment.

China’s National Bureau of Statistics (NBS) has reported robust year-over-year Retail Sales growth of 4.6% in August, surpassing expectations of 3.0% and marking an improvement from the previous 2.5%. Concurrently, Industrial Production (YoY) also exceeded estimates, showing a 4.5% growth in August, up from July’s 3.7%.

China’s stimulus efforts are noteworthy, as the People’s Bank of China (PBoC) recently reduced the Reserve Requirement Ratio (RRR) by 25 basis points (bps) for a significant portion of the banking system. This marks the second such reduction this year and is expected to inject liquidity into the economy, potentially boosting growth in the world’s second-largest economy.

While China’s actions contribute to optimism, the trajectory of the USD/CNH pair is still influenced by the policy stance of the US Federal Reserve (Fed), which could support USD/CNH bulls.

The US Dollar Index (DXY), measuring the USD’s performance against major currencies, is trading near its six-month highs around 105.30. Positive economic data from the US is contributing to this strength, including Initial Jobless Claims of 220,000 for the week ending September 8, beating the forecast of 225,000 and showing slight improvement from the previous week’s 217,000.

The Core Producer Price Index (PPI) for August met expectations with a 2.2% increase, slightly lower than the previous rate of 2.4%. Retail Sales also improved, rising to 0.6% from the previous month’s 0.5%, surpassing expectations.

Despite these positive indicators, the CME FedWatch Tool has reduced the probability of a 25 bps rate hike by the Fed in November to 35%. This has led to market caution as traders carefully assess the evolving economic outlook and the Fed’s communication.

Later in the North American session, the release of the US preliminary Michigan Consumer Sentiment Index will be monitored. Expectations are for a minor decline from 69.1 to 69.5. A reading that aligns with or exceeds these expectations could provide the USD with the momentum it needs to sustain its upward trend, as it offers insights into consumer sentiment that can influence market sentiment and trading decisions regarding the Greenback.

USD/CNH: ADDITIONAL IMPORTANT LEVELS

OVERVIEW
Today last price7.2704
Today Daily Change-0.0196
Today Daily Change %-0.27
Today daily open7.29
TRENDS
Daily SMA207.2983
Daily SMA507.2439
Daily SMA1007.1698
Daily SMA2007.0235
LEVELS
Previous Daily High7.2972
Previous Daily Low7.2608
Previous Weekly High7.3682
Previous Weekly Low7.2548
Previous Monthly High7.3496
Previous Monthly Low7.1452
Daily Fibonacci 38.2%7.2833
Daily Fibonacci 61.8%7.2747
Daily Pivot Point S17.2682
Daily Pivot Point S27.2464
Daily Pivot Point S37.2319
Daily Pivot Point R17.3045
Daily Pivot Point R27.319
Daily Pivot Point R37.3408

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