USD/CNH revisits sub-7.000 area following strong China CPI numbers
- USD/CNH snaps two-day recovery as Chinese CPI grew the fastest since October 2011.
- Coronavirus is likely to peak in mid-to-late February, fears of heavy economic toll prevails.
USD/CNH stays on the back foot around 6.9950 while heading into the European session on Monday. The pair recently weakened from the four-day high after January month Chinese inflation. However, fears of coronavirus likely having widespread negative economic impacts continue to challenge the trade sentiment.
China’s January month CPI registered the fastest pace of increase while rising well beyond a 4.9% forecast to 5.4% on YoY. The monthly figures also crossed 0.8% market consensus with 1.4% mark whereas PPI matched 0.1% expected versus -0.5% prior.
Read: Chinese CPI YoY (Jan): 5.4% vs 4.9% expected and 4.5% prior, (fastest rise since Oct 2011)
Following the data, market sentiment recovered while also taking clues from the news that China's central bank injects 900 billion into the market. Additionally, expectations that the deadly virus outbreak will peak in Wuhan in mid-to-late February, as per the UK's epidemiologist Adam Kucharski, also contributed positively to the risk reset.
With that, the US 10-year treasury yields gain more than one basis point (bp) to 1.59%. However, major stocks in Asia are yet to overcome the red territory.
Earlier, news that the coronavirus crossed the SARS epidemic of 2002/03 and the statistics on the contagion weighed on the trade sentiment.
While the current risk reset is less likely to last long unless any strong developments, market players could keep being cautious amid the coronavirus fears, broad US dollar strength.
Technical Analysis
Unless providing either a daily closing beyond a 100-day SMA level of 7.0200 or below 6.9720, comprising 50-day SMA, traders should gain any clear direction of the pair’s moves.
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