#USDCNH @ 7.17525 remains depressed while extending previous day’s pullback from fortnight high. (Pivot Orderbook analysis)

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• USD/CNH remains depressed while extending previous day’s pullback from fortnight high.
• China’s CPI offered positive surprise, PPI eased in September.
• PBOC’s Yi signals more room to adjust policy, hints at stimulus to support real economy.
• US consumer-centric data will be important as DXY remains downbeat.

The pair currently trades last at 7.17525.

The previous day high was 7.2384 while the previous day low was 7.1632. The daily 38.2% Fib levels comes at 7.2097, expected to provide resistance. Similarly, the daily 61.8% fib level is at 7.1919, expected to provide resistance.

USD/CNH drops back below 7.1700 as it snaps a seven-day uptrend during Friday’s Asian session. In doing so, the offshore Chinese yuan (CNH) pair stretches the previous day’s pullback from a two-week high even as the inflation numbers came in mixed. The reason could be linked to the comments from People’s Bank of China (PBOC) Governor Yi Gang, as well as the broad US dollar weakness.

That said, China’s headline Consumer Price Index (CPI) matched upbeat market forecasts by rising 2.8% in September while the Producer Price Index (PPI) fell short of meeting expectations during the stated month, down to 0.9% versus 1.0% forecasts and 2.3% prior.

Earlier in the day, People’s Bank of China (PBOC) Governor Yi Gang mentioned, “The PBOC has room to adjust policy given the inflation rate in China is well within target.” The policymaker also signaled multiple moves, mostly suggesting more stimulus for infrastructure and housing, to provide stronger support for the real economy.

Although the USD/CNH bears are in full steam, the latest coronavirus wave in Hong Kong, Shanghai and Beijing join the broad push for higher rates to challenge the optimism in China.

On Thursday, a third consecutively softer US Consumer Price Index (CPI) jostled with the 40-year high Core CPI and drowned the US Dollar Index (DXY) despite hawkish Fed bets. Talking about the data, the US CPI rose to 8.2% versus 8.1% market forecasts but eased as compared to the 8.3% prior. The CPI ex Food & Energy, mostly known as the Core CPI, jumped to 6.6% while crossing the 6.5% expectations and 6.3% previous readings.

Amid these plays, the US Treasury yields dropped three basis points (bps) to 3.92% whereas the S&P 500 Futures and stocks in the Asia-Pacific region print gains at the latest.

Moving on, headlines surrounding the PBOC’s next move and covid will be important for the USD/CNH pair traders to watch for fresh impulse ahead of the key US Retail Sales for September, expected 0.2% MoM versus 0.3% prior. Also important will be the preliminary readings of the Michigan Consumer Sentiment Index (CSI) and the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations for October.

Also read: US Retail Sales Preview: Positive surprises eyed for dollar bulls to regain poise

Thursday’s Gravestone Doji on the daily chart joins nearly overbought RSI (14) to keep bears hopeful.

Technical Levels: Supports and Resistances

USDCNH currently trading at 7.1682 at the time of writing. Pair opened at 7.1772 and is trading with a change of -0.13% % .

The pair remains strongly bullish on the daily timeframe. It trades above its 20 SMA @ 7.1096, 50 SMA 6.9658, 100 SMA @ 6.8425 and 200 SMA @ 6.6431.

The previous day high was 7.2384 while the previous day low was 7.1632. The daily 38.2% Fib levels comes at 7.2097, expected to provide resistance. Similarly, the daily 61.8% fib level is at 7.1919, expected to provide resistance.

Note the levels of interest below:

• Pivot support is noted at 7.1476, 7.1178, 7.0724
• Pivot resistance is noted at 7.2226, 7.268, 7.2978

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