The USD/CNY exchange rate continued its bullish comeback as investors wait for the upcoming National People’s Congress (NPC). It also rallied amid the ongoing convergence between the Federal Reserve and the People’s Bank of China (PBoC). The USD to CNY rate jumped to a high of 6.97, the highest point since December 29.
NPC delegates meeting ahead
The Chinese yuan has been in a strong bearish trend in the past few weeks as the US dollar index soared. As I wrote earlier in this article, the DXY index has jumped above $105, which is much above the lowest point this year.
The main reason for this recovery is that the US and China have moved in diverging directions. China is attempting to boost its growth after the economy grew at the slowest pace in years in 2022 due to the Covid-zero strategy.
On the other hand, the Federal Reserve is attempting to engineer a soft landing as it battles elevated inflation. It is doing that by hiking interest rates at the fastest pace than what analysts were expecting. Data published last week showed that inflation remained red-hot in January.
There are several important USD/CNY catalysts for the coming weeks. The most important thing to watch will be the upcoming NPC meeting in China that is scheduled for March 5. This meeting will have important outcomes, including the GDP target of the year. Also, China will replace its premier, who will be tasked with navigating the economic environment.
The USD to CNY price will also react to important economic data from the United States. On Tuesday, the Conference Board will publish the latest consumer confidence data. There will also be the flash manufacturing and services PMI numbers. The pair will also react to the latest housing numbers from the US.
USD/CNY forecast
The 4H chart shows that the USDCNY price has been in a strong bullish trend in the past few days. It has managed to move above the 38.2% Fibonacci Retracement level. It has moved above the important resistance level at 6.9361, the lowest point in December.
The pair has moved above the 25-day and 50-day moving averages. Oscillators like the Stochastic and the Relative Strength Index (RSI) have moved to the overbought level. Therefore, the bullish trend will likely continue soaring, with the next key resistance to watch being a 7.00.
Source: https://invezz.com/news/2023/02/27/usd-cny-analysis-ahead-of-the-national-peoples-congress/