USD/CNH prints the first daily loss in four after China inflation data for July.
Improvement in PPI supersedes downbeat CPI data to allow Yuan to pare recent losses.
MACD, RSI keep buyers hopeful of poking multi-month-old descending resistance line.
21-DMA, fortnight-old rising support line restricts immediate downside of USD/CNH.
USD/CNH renews its intraday low near 7.2220 while reversing from a one-month-old horizontal resistance during early Wednesday. In doing so, the offshore Chinese Yuan (CNH) pair gives more importance to the improvement in the factory-gate inflation than the consumer price increase, as well as cheer the market’s stabilization, while snapping a three-day losing streak.
That said, China’s headline inflation gauge, namely the Consumer Price Index (CPI), declines to -0.3% YoY versus -0.4% YoY expected and 0.0% prior whereas the Producer Price Index (PPI) improves to -4.4% YoY compared to -4.1% YoY market forecasts and -5.4% previous readings.
Technically, the latest pullback remains elusive amid bullish MACD signals and an upbeat RSI (14) line.
Also challenging the short-term USD/CNH bears are the 21-DMA and a fortnight-long rising support line, respectively near 7.1815 and 7.1760.
Following that, the upward-sloping trend line from early May and February, close to 7.1480 and 7.0990 in that order, will be in the spotlight.
On the contrary, a daily closing beyond the aforementioned monthly horizontal resistance near 7.2370-80 could quickly propel the USD/CNH pair towards a descending trend line from late October 2022, surrounding 7.2730 by the press time.
In a case where the offshore Chinese Yuan manages to cross the 7.2730 hurdle, the yearly top marked in June near 7.2860 will act as the last defense of bears
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