USD/CNH at 2020 high as China re-opens with weak data, rate cuts amid coronavirus

• USD/CNH pours cold water on the Chinese government’s efforts to tame short-selling.
• The downbeat Caixin Manufacturing PMI, reverse repo cuts from China add to the pair’s strength amid coronavirus fears.
• Chinese stocks have already dropped 9% since the day’s start.

USD/CNH takes the bids near 7.0110 during the Asian session on Monday. The pair recently benefited from Chinese traders’ return after a long Lunar New Year holiday period stretched from January 23. The weaker than expected China Caixin Manufacturing PMI and reverse repo cuts, coupled with fears of coronavirus outbreak, have propelled the pair moves off-late.

Be it five-month low of China’s Caixin Manufacturing PMI or -6.3% figure for Chinese industrial profits, not to forget cuts to seven-day and 14-day reverse repos, the USD/CNH bulls have everything they need.

The pair’s previous run-up could be attributed to the lethal outbreak of coronavirus that has so far infected more than 14,500 lives across the globe. The virus has been termed by the World Health Organization (WHO) as a global emergency whereas it also forced global leaders to cut their travels to and from China.

The Chinese authorities have already taken measures to tame the short-selling by way of announcing liquidity infusion and also via trade stipulation actions. However, nothing could stop China’s equities from declining nearly 9% while the US 10-year treasury yields mark risk-off while being sluggish around 1.52%.

Investors will now keep eyes on how the Chinese traders react to fears of coronavirus while also keeping eyes on the US fundamentals.

Technical Analysis

With its sustained break of the four-month-old falling trend line, USD/CNH seems ready to confront December 2019 top near 7.0870. Meanwhile, a daily closing below 200-day SMA level of 6.9880 can trigger a fresh pullback.