USD/CNH bulls cross 7.3200 on PBoC action, cautious optimism ahead of Jackson Hole event

• USD/CNH picks up bids to refresh intraday high after China infuses market liquidity.
• PBoC cuts one-year LPRs, China Commerce Ministry offers help to farmers.
• Mixed concerns about Fed Chair Powell’s speech at Jackson Hole, hopes of more stimulus from China underpin market’s consolidation.
• PMIs for August, risk catalysts eyed for clear directions.

USD/CNH takes the bids to refresh intraday high after the People’s Bank of China (PBoC) announced rate cuts early Monday. Adding strength to the offshore Chinese Yuan (CNY) pair could be the weekend headlines suggesting more stimulus from China. With this, the quote rises for the second consecutive day to 7.3240 by the press time, following the three-week uptrend.

People’s Bank of China (PBOC), lowered the one-year Loan Prime Rate (LPR) to 3.45% from 3.55% previous and 3.40% expected. However, the Chinese central bank kept the five-year LPRs unchanged at 4.20%. It’s worth noting that the PBoC previously cut the Medium-term Lending Facility (MLF), Standing Lending Facility rates (SLFs) and Reverse Repo Rates to infuse liquidity into the world’s second-largest economy.

Earlier in the day, Chinese state media Xinhua came out with the news suggesting the authorities plan to introduce subsidies for fertilizers and pesticides in the northern region of the nation, per Reuters. On the same line, the weekend news from China suggests the dragon nation’s more efforts to infuse liquidity into the world’s second-largest economy, which in turn triggered the market’s cautious optimism during early Monday.

While portraying the mood, Wall Street closed mixed on Friday whereas the US Treasury bond yields retreat after a strongly negative week for the equities and the upbeat bound coupons. That said, the S&P500 Futures remain lackluster at the monthly low by the press time.

On the other hand, the US Dollar Index (DXY) retreats from a 10-week high as market players struggle to aptly predict Fed Chairman Jerome Powell’s view at this week’s Jackson Hole Symposium. That said, the DXY rose in the last five consecutive weeks before retreating to 103.30.

The upbeat US NY Fed Manufacturing Index, Retail Sales and wage growth allowed the DXY to remain firmer for the fifth consecutive week, especially backed by the hawkish Fed Minutes. That said, the latest Fed Minutes showed that most policymakers preferred supporting the battle again the ‘sticky’ inflation, despite being divided on the imminent rate hike. Additionally, the market players started reassessing previous biases about the major central banks and added strength to the risk aversion, primarily fuelled by the China-linked woes. On the same line, investors anticipated that the end of the rate hike cycle is still unclear, which means more bearish pressure on riskier assets and a rush for the US Dollar.

Looking ahead, preliminary readings of the August month Purchasing Managers Indexes (PMIs) and Durable Goods Orders for July will entertain the USD/CNH traders ahead of the central bankers’ speeches at the annual Jackson Hole Symposium event.

Technical analysis

A clear U-turn from the fortnight-old support line, around 7.3000 by the press time, directs USD/CNH towards the yearly top marked the last week surrounding 7.3500.