Edge-Forex Forex

USD/CNH dips to 7.3100 on PBOC interference, US NFP watched

The USDCNH is under pressure at its intraday low and has fallen for two days in a row. PBOC reports the largest weekly cash outflow in nine months. Bears cannot link amid pre-NFP consolidation despite an increase in China’s Covid counts and a higher DXY.

In response to rumors that the People’s Bank of China (PBOC) had interfered with the market early on Friday, USDCNH accepted offers to retest the intraday low at 7.3130. The offshore Chinese Yuan (CNH) pair applauds the US dollar’s decline in response to the cautious atmosphere ahead of the critical US employment data.

According to the most recent Reuters calculations, the largest weekly cash outflow in over nine months was a net of 737 billion Yuan for the week via open market operations.


However, it should be highlighted that the USDCNH bears are off the table due to the recent escalation of the covid problems and the US Federal Reserve’s (Fed) hawkish inclination. Nevertheless, according to the most recent information from Reuters, China recorded 4,045 new COVID-19 infections on November 3 compared to 3,372 new cases reported a day earlier.

On the other side, the recent weakening of the USDCNH pair may be related to conflicting US statistics and US inflation predictions. Regarding the numbers, the US ISM Services PMI for October fell to 54.4 from 56.7 in September and 55.5 in the market estimate.

However, factory orders came in at 0.3% as expected, as opposed to prior readings that had been revised up by 0.2%. It should be mentioned that although the initial jobless claims decreased to 217K for the week ending October 28 compared to 220K projected and 218K before, the US S&P Global Composite PMI and Services PMI both saw increases from their initial readings for the specified month. On the other hand, US inflation expectations decreased to their lowest levels since October 19 and 13, respectively, according to the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) statistics.

The USDCNH bears are also kept optimistic by somewhat lively Asia-Pacific markets, highlighted by Hang Seng’s 5.75% run-up. While Japan’s Nikkei falls by at least 1.85% daily, the MSCI’s Index of Asia-Pacific Shares Excluding Japan increases by more than 1.0%.

Although officials from the Bank of England (BOE), the US Federal Reserve (Fed), and the European Central Bank (ECB) expressed concerns about rising rates and an economic downturn, it seemed that the US dollar remained on the offensive. Despite this, the US Dollar Index (DXY) has dropped from a three-week high to 112.78 at the time of publication.

Given that the session leading up to the release of the US employment data for October was underwhelming, USDCNH traders may be keenly watching the US jobs report, particularly the headline Nonfarm Payrolls (NFP), for guidance. Forecasts indicate that the headline US NFP may decline from 263K in September to 200K in October, while the US Unemployment Rate may rise from 3.5% to 3.6%. But in the event of a surprise, the pessimistic predictions for the planned statistics point to a corrective move from the crucial support line.


Technical Analysis

The pullback in the USDCNH remains illusive until it breaks the monthly support line, which is at 7.2230 at the time of publication. However, the pair’s recovery needs confirmation from a declining resistance line that has been in place for eight days, or about 7.3470.