USD/CNH bounces off 21-day EMA in a reaction to China’s downbeat trade surplus

• USD/CNH pulls back from 21-day EMA after China’s August month trade data disappointed CNH buyers.
• Expectations of further easing from the PBOC also favor the pair’s upside.
• US-China trade headlines will be closely followed for fresh impulse.

Repeating its pattern of July and August, the USD/CNH pair again bounces off 21-day EMA as it takes the bids to 7.1198 during early Monday.

The immediate catalyst for the pair’s U-turn could be August month trade data from China. The dragon nation registered a fall in headline Trade Balance to $34.8B versus $43.00B expected while also flashing -1.0% slump in Exports (YoY) versus 2.0% forecast. Further, China’s exports to the US dropped 16% YoY, after -6.5% in July, whereas the imports from the US shrank 20% on the yearly format.

Additionally, the People’s Bank of China’s (PBOC) plans to unleash roughly 900 billion Chinese Yuan ($126 billion) via a cut in reserve ratio for financial institutions also becomes an additional burden on the Chinese Yuan (CNY).

On the contrary, optimism surrounding the US-China trade deal have brightened off-late with the White House Adviser Larry Kudlow signaling a visit by the Chinese deputies during the month-end ahead of the key October talks.

China’s increase in Gold reserves to 62.45 million fine troy ounces  in August from 59.560 million ounces at the end of 2018 and sustained taming of Yuan reference rate, to 7.0851 from 7.0855, are some additional Chinese headlines to know.

With no key data/event up in the economic calendar, investors will keep an eye over trade headlines for fresh trade direction.

Technical Analysis

Only a daily closing below 21-day exponential moving average (EMA) level of 7.1086 could drag the quote to 7.0000 else chances of its another run-up towards 7.2000 can’t be denied.