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 Dollar-Yuan exchange rate
- USD/CNH technical setup may indicate upside exhaustion
WEDNESDAY’S ASIA-PACIFIC OUTLOOK
Asia-Pacific markets may rebound today after selling eased overnight in US markets. The high-beta Nasdaq 100 Index (NDX) gained 1.30% although the Dow Jones Industrial Average shed 0.26%. Meanwhile, commodity prices slipped across most metals and energy products ahead of tonight’s US inflation data. The high-flying US Dollar may receive a boost if the print exceeds analysts’ expectations. The Greenback is at multi-year highs versus several major peer currencies, the Chinese Yuan included.
Despite the pullback in crude oil prices, which dropped more than 3% overnight, gasoline prices at the pump have hit a record high in the US. That is partly due to refiner capacity being offloaded more to other products such as diesel. The lack of exports from Russia has placed a higher demand on those heavier fuels at a time when some refinery capacity is offline due to scheduled maintenance. That may help to keep prices elevated downstream in the economy as shipping costs rise due to those fuel costs.
The Australian Dollar and New Zealand Dollar remain depressed amid the pullback in commodity prices. Iron ore prices are trading near their lowest levels since January, while copper prices are setting fresh 2022 lows. Gold prices fell to the lowest since early February as real yields climbed. The US CPI data due out tonight may influence those metal-sensitive yields, although a rebound for the yellow metal looks unlikely in the short term, given ongoing chatter around a potential 75-basis point Fed rate hike.
Today, APAC traders will have their sights on Chinese inflation data. China’s consumer price index (CPI) for April is expected to cross the wires at 1.8% on a year-over-year basis, according to a Bloomberg survey. Last week, Chinese officials doubled down on the country’s aggressive “Covid-Zero” strategy even as public dissent grows and at the risk of inflicting economic damage to the point of a possible recession. Still, a weaker-than-expected print would make it easier to enact further monetary and fiscal support measures in the economy. That may not be enough to combat the damage done from lockdowns, however.
USD/CNH TECHNICAL FORECAST
USD/CNH is lower this week, but the pair remains near its highest levels since early 2020. The Relative Strength Index (RSI) is beginning to show possible warning signs after briefly dipping back into neutral territory below 70 last week. The MACD oscillator’s strength also appears to be receding. Those together may signal that the bullish energy in the pair could be exhausted.
USD/CNH DAILY CHART