USD/CNH eyes Chinese CPI data ahead of US inflation

Chinese Yuan, USD/CNH, CPI, Market Sentiment, Commodities – Talking Points

  • APAC market rebound may be on the table after US session
  • Chinese CPI data may influence the dollar-yuan exchange rate
  • The USD/CNH Technical Pattern May Indicate Upside Exhaustion

Wednesday’s Asia-Pacific Outlook

Asia-Pacific markets may rebound today after an overnight drop in sales in US markets. The high-beta Nasdaq 100 (NDX) index gained 1.30%, although the Dow Jones Industrial Average lost 0.26%. Meanwhile, commodity prices slid across most metals and energy commodities ahead of tonight’s US inflation data. The high-flying US dollar could get a boost if the release beats analysts’ expectations. The greenback is at multi-year highs against several major peer currencies, including the Chinese yuan.

Despite the pullback in crude oil prices, which fell more than 3% overnight, gasoline prices at the pump hit a record high in the United States. This is partly due to refiners’ capacity being offloaded more to other products such as diesel. Russia’s lack of exports has increased demand for these heavier fuels at a time when some refining capacity is offline due to scheduled maintenance. This can help keep prices high in the downstream economy as shipping costs increase due to these fuel costs.

The Australian dollar and New Zealand dollar remain depressed amid falling commodity prices. Iron ore prices are trading near their lowest levels since January, while copper prices set new lows in 2022. Gold prices fell to their lowest since early February as yields real climbed. US CPI data due out tonight could influence these metal-sensitive returns, although a rebound in the yellow metal seems unlikely in the near term, given ongoing talk of a possible rate hike. of the Fed by 75 basis points.

Today, APAC traders will have their sights set on Chinese inflation data. China’s consumer price index (CPI) for April is expected to cross 1.8% year-over-year, according to a Bloomberg survey. Last week, Chinese officials redoubled their efforts on the country’s aggressive “Covid-Zero” strategy even as public dissent grows and at risk of inflicting economic damage to the point of a possible recession. Nevertheless, weaker than expected printing would facilitate the adoption of further monetary and fiscal support measures in the economy. However, this may not be enough to combat the damage caused by blockages.

USD/CNH Technical Forecast

USD/CNH is lower this week, but the pair remains close to its highest levels since the start of 2020. The Relative Strength Index (RSI) is starting to show possible warning signs after briefly recovering in neutral territory below 70 last week. The strength of the MACD oscillator also seems to be decreasing. These together may signal that the bullish energy in the pair may be exhausted.

USD/CNH daily chart

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

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