USDCNY: Dollar and Yuan Slug it Out With Strong Data

Summary:

USDCNY bulls got a much-needed rally this week after strong U.S. inflation results showed there is still underlying support for prices in the U.S.

USDCNY bulls got a much-needed rally this week after strong U.S. inflation results. Although the numbers came in as expected, the release showed there is still underlying support for prices in the world’s largest economy.

The inflation figures came in at 1.4% which was expected by economists but helped to spur gains in the greenback across the board. The dollar has been under pressure in recent weeks after the return of a second stimulus package. The talks have stalled once more, but President Trump has already agreed to a $1.8 trillion package, which has been pushed back by Democrats who are seeking a $2.2 trillion deal. Any further stimulus will include checks, which were an underlying reason for recent inflationary pressures in the U.S. and could push indicators closer to the Fed’s 2% target.

The Yuan fought back today after data showed imports grew at the fastest pace for the year in September. Exports were also strong as many of China’s trading partners loosened virus restrictions. Some analysts have warned that exports may have seen a peak after they were heavily-boosted by the manufacture and export of PPE equipment required for the virus regulations.

Friday will see retail sales and consumer sentiment figures from the U.S. economy. Retail sales are expected to come in at 0.7% after last month’s 0.6% number. Michigan Consumer Sentiment is also looking for a small increase with 80.5 compared to 80.4 in August. The retail number may determine whether this is a low, or a pause in the downtrend.

USDCNY Technical Outlook

USDCNY on the weekly chart is taking a pause from the downtrend ahead of key resistance at 6.67. The target for bears would be a break of this level and shorting a rally may be a good option if it is not driven by a real sentiment change. Bulls will want to see a more pronounced base over the next few weeks and a buy may setup ahead of the election result. The Investing Cube team is currently available to assist all levels of traders with the Forex Trading Course or through one-to-one coaching.