USD/CNH: Rejected at 7.10 even though PBOC announced weakest daily Yuan fix since 2008

• Offshore Yuan (CNH) is reporting moderate gains at press time.
• PBOC announced a weakest daily Yuan fix in over a decade.
• An above-forecast China trade data could yield a deeper drop in USD/CNH.

USD/CNH faced rejection at 7.10 a few minutes before press time and is currently trading at 7.0682, representing 0.25% losses on the day.

The People's Bank of China (PBOC) set the onshore Yuan (CNY) reference rate at 7.0039 earlier today. That is the first weaker-than-7 daily fix since 2008.

It indicates the central bank is getting increasingly comfortable with the idea of Yuan trading below 7 per US Dollar.

Even so, Yuan's offshore exchange rate (CNH) is gaining ground, possibly because the daily fix was stronger-than-expected. Markets were expecting China's central bank to announce the daily fix in the range of 7.0205-7.0130.

Focus on China data

The data due in a few hours is forecasted to show China's trade surplus narrowed to $40 billion in June from $50.98 billion in May. Exports or outbound shipments are seen falling 2 percent year-on-year, while imports are expected to slide by 8.3%.

An above-forecast data could put a bid under the CNH, although gains will likely be short-lived if China reports a surge in the trade surplus with the US.

That will likely embolden President Trump to up the ante in the ongoing trade war, leading to risk aversion.

Pivot points