Following the release of important June activity data, the USD/CNH reverses from an intraday high.
The NBS Manufacturing and Non-Manufacturing PMIs in China defied market expectations but remained below prior levels.
With buoyant stock futures and lackluster Treasury rates, sentiment remains ambiguous.
Ahead of the US ADP Employment Change, traders may be entertained by US-China tensions, conflicting reports, and Fedspeak.
During early Wednesday, USD/CNH fails to maintain the previous day’s recovery off the weekly low, reversing from intraday high. As a result, the Chinese currency (CNH) pair reacts to mixed official PMI data for June in the midst of sluggish markets.
China’s NBS Manufacturing PMI increased to 50.9, exceeding the prediction of 50.8, but lagging behind the previous reading of 51.00. Similarly, after topping the 52.7 market consensus with 53.5 readings for June, the Non-Manufacturing PMI remained below 55.2.
Read more: Chinese PMIs beat expectations but fall short of expectations
Earlier in the day, the coronavirus (COVID-19) joined mixed Fedspeak to tease USD/CNH bulls, but predictions of a faster rebound in China than the US seemed to have recalled the bears. Additionally, Bloomberg reports that the People’s Bank of China (PBOC) will lead the Fed in monetary policy revisions, adding to the pair’s weakness.
While the situation in Beijing appears to be improving, other significant economies in the Asia-Pacific region, such as Australia, continue to be concerned about the Delta version of the coronavirus. On the other hand, Fed policymakers remain wary of accepting inflationary pressures, not to mention the push for tapering and rate hikes, which puts greenback buyers to the test. Furthermore, the recent sluggish changes in US Treasury yields act as an additional barrier to the US dollar’s gain, weighing on USD/CNH pricing.
It should be noted, however, that stocks are moderately positive and have been flirting with new highs in recent days, reducing the US dollar’s safe-haven demand and keeping USD/CNH bearish upbeat.
Nonetheless, today’s US ADP Employment Change for June, which is predicted to be 600K versus 978K the previous month, will be the key to keep an eye on for new momentum ahead of Friday’s Nonfarm Payrolls.
ADP Nonfarm Payrolls Predictions: Going against the grain? What is the best way to trade this leading indicator?
During Tuesday’s corrective downturn, the USD/CNH failed to break through the 100-day SMA, which directed sellers toward the weekly bottom near 6.4520.
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