- USD/CNH probes intraday high above 0.6550 while bouncing off fresh lows since July 2018 flashed the previous day.
- Market optimism fades amid fresh challenges from virus, geopolitics and also to soft Brexit hopes.
- China and US diverge over COVID-19 response, says Reuters’ analysis.
- Risk headlines will be the key amid a light calendar.
USD/CNH takes the bids near 6.6560, an intraday high of 6.6593, during the early Thursday. The pair dropped to the fresh low since late 2018 following the broad US dollar weakness, backed by the market’s risk-on mood, during the previous day. Though, recent headlines probe optimists with the fears of fresh geopolitical tension, economic worries and the coronavirus (COVID-19) woes.
Not only the COVID-19 update suggesting over 50% of US states recording monthly high new cases but news from the US Federal Bureau of Investigations (FBI) that Iran and Russia meddled with the American elections also probe the market sentiment. Further, a rethink over Brexit, as well as US virus stimulus additionally, spoiled the mood.
Concerns that China will have an upper hand over the US in the future, mainly due to its ability to jump back from the pandemic-led economic slowdown, as cited by Reuters, offered additional worries to the traders as most marketers have always seen America as the global leader. “The United States and China dealt with the spread of the devastating coronavirus pandemic in vastly different ways, and that split is reshaping the global battle between the world’s two leading economies,” said Reuters.
While the risk-off dragged the US stock futures and Asia-Pacific shares toward the south, the US dollar index (DXY) also pared the previous day’s losses from the seven-week low. As a result, most currencies paired with the greenback witness the counter moves from Wednesday.
It’s worth mentioning that the improving expectations of China’s recovery join increasing odds of the fresh to the Sino-American relations if Joe Biden wins the US elections, as widely anticipated, to favor the optimism for Asian markets. Though, it negatively affects the shares as the government may now think to curtail the ultra-easy policies to combat the virus.
Considering the lack of major data/events, global traders may await fresh clues to extend the latest pullback. In doing so, updates concerning the American aid package, virus and geopolitics will be the key.
Unless successfully breaking a five-week-old falling trend line, at 6.6450 now, bulls can aim for October 09 low near 6.6785.