Market Spotlight: USDCNH Channel Break On Watch

31244 market spotlight usdcnh channel break on watch

Weak China Data Weighs On YuanThe latest set of Chinese PMI data sets released overnight have revealed the impact of fresh COVID lockdowns as the country battles omicron. The Caixin manufacturing PMI was seen falling to 49.1 in January, marking a decline from the prior month’s 50.9 reading and a fresh contraction in the factory sector. Indeed, the figure was lower than the 50.1 result expected. With this latest decline, the factory sector in the world’s second largest economy is now at its lowest level since February 2020, during the height of the pandemic.Given the issues facing the Chinese economy as it continues to run a zero-COVID strategy, this reading will no doubt increase expectations of further action likely to be taken in a bid to support the Chinese economy. With this in mind, there are near term downside risks for CNH, particularly against USD, given the Fed’s hawkish shift.Technical ViewsUSCNHWhile prices has been moving lower within a bear channel, we’ve seen bullish divergence creeping in along recent lows. With MACD and RSI turning higher following the large bullish engulfing candle off the 6.3246 level, the focus is now on an upside channel break. Bulls can look for a break of 6.4018, targeting 6.4241 initially and 6.4490 above.

Source: Tickmill

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