USD/CNH retreats from weekly high as sellers attack 6.7000 on mixed China inflation
- USD/CNH snaps three-day uptrend following unimpressive China CPI, PPI.
- Shanghai and Beijing unveiled fresh activity restrictions after dialing back some a few days back, mass testing is on the way.
- Risk-off mood ahead of US inflation data challenge bears.
USD/CNH pulls back from a weekly top, refreshing an intraday low around 6.6950, even as China’s inflation data came in mixed for May. The reason could be linked to the US dollar’s pullback ahead of the key Consumer Price Index (CPI) figures for May.
China’s headline inflation number, namely the Consumer Price Index (CPI), reprints 2.1% figures to ease below the 2.2% market consensus. Further, the factory-gate inflation gauge, namely the Producer Price Index (PPI), matches the 6.4% forecasts for May.
It’s worth noting, however, that the fresh covid fears in China, due to the return of activity restrictions in Shanghai and Beijing, challenge the USD/CNH bears. “China's commercial hub of Shanghai faces an unexpected round of mass COVID-19 testing for most residents this weekend - just 10 days after a city-wide lockdown was lifted - unsettling residents and raising concerns about the impact on business,” said Reuters.
Furthermore, Escalating fears of faster/heavier rate hikes and the negative economic repercussions of the same seem to weigh on the market’s performance of late. The growing concerns over hot inflation and the Russia-Ukraine tussles are some of the extra catalysts that keep USD/CNH bulls hopeful.
Talking about the US inflation data, the CPI is expected to remain static at around 8.5% YoY but the White House has already signaled a higher number, which in turn could renew the US dollar buyer and push back the USD/CNH sellers.
Technical analysis
Thursday’s Doji candlestick below the short-term hurdle, namely the 21-DMA level of 6.7075, directs USD/CNH bears towards revisiting the previous month’s low near 6.6475.