USD/CNH slides beneath 7.1900, snaps four-day uptrend even as PBoC keeps LPRs unchanged

• USD/CNH holds lower grounds near intraday bottom during first negative day in five.
• PBoC holds one-year, five-year LPRs unchanged but eases boundaries for international investments.
• Fears of fresh US-China tension, mixed concerns about Fed fail to defend US Dollar bulls amid light calendar.
• Risk catalysts eyed ahead of mid-tier US data about employment, housing.

USD/CNH bears are back to the table as the offshore Chinese Yuan (CNH) jumps the most in six days after the early Thursday’s People’s Bank of China (PBoC) announcements. That said, the quote prints the first daily loss in five, 0.55% intraday by the press time, as it stays around the day’s low of 7.1800, close to 7.1920 at the latest.

PBoC kept its benchmark Loan Prime Rates (LPRs) unchanged during today's Interest Rate Decision. That said, the one-year and five-year LPRs are held intact at 3.55% and 4.20% respectively at the latest. The Chinese central bank, however, eased restrictions on cross-border funding by lifting the adjustment parameter for firms to 1.5 from 1.25. The same allows the Chinese institutes to gain international funding with lesser hardships and helped the CNH in turn.

It should be noted that the fresh fears of the US-China tussles, emanating from the comments of China diplomat and the US House of Representatives move concerning outbound investments and AI chips, seem to prod the USD/CNH bears amid a sluggish session.

However, the downbeat US housing data and mixed concerns about the Fed join the optimism at the US banks to weigh on the pair of late, despite the risk-off mood.

That said, US Building Permits for June marked a contraction of 3.7% versus the previous increase of 5.6% (revised) whereas the Housing Starts also slumped 8.0% for the said period from 15.7% revised prior. Though the previously released slower growth of the US Retail Sales for June contrasted with promising details to defend the Federal Reserve in keeping the rates higher for longer, as well as help in announcing a 0.25% rate hike in July. The same triggered the US Dollar’s corrective bounce off the 15-month low on Tuesday and helped defend the recovery on Wednesday, ahead of the latest retreat.

While portraying the mood, the S&P500 Futures print mild losses whereas the US Treasury bond yields trade mixed at the weekly low. Further, the US Dollar Index (DXY) drops 0.25% intraday to retest the 100.00 round figure while snapping a two-day rebound from the lowest level since April 2022.

Moving forward, headlines about China and the Fed will be crucial to determine short-term USD/CNH moves while the US Initial Jobless Claims and Existing Home Sales will decorate the economic calendar.

Technical analysis

Despite the latest retreat, the USD/CNH pair remains well above the two-month-old rising support line and the 50-DMA, respectively around 7.1600 and 7.1480, which in turn keeps the buyers hopeful amid a steady RSI (14) line.