USD/CNH struggles around 7.000 as US dollar consolidates Fed-led losses

• USD/CNH recovers from intraday low of 6.9916, defies the previous day’s losses.
• The surge in the coronavirus cases in China and the US joins hopes of fiscal stimulus from America.
• US dollar retraces from the lowest since June 2018 following the heavy rush to the south past-FOMC.

USD/CNH picks up the bids around 6.9975 during the early Thursday. The quote recently benefited from the latest coronavirus (COVID-19) updates from American and Beijing. Also supporting the pair’s U-turn from a two-day low is the latest news that increases odds of the much-awaited fiscal package form the US.

Reuters cites the Chinese health commission to mark an increase in the pandemic cases on Thursday. As per the recent update, the dragon nation reported 105 new versus 101 marked a day earlier. Out of the total, “96 were in the far western region of Xinjiang, five were in the northeastern province of Liaoning, one was in Beijing, and three were imported cases, according to a statement by the National Health Commission,” mentioned the news. There are total of 84,165 confirmed cases in the Asian major as of Wednesday. On the other hand, the total numbers of new cases cross 4.5 million with the latest surge in the death toll, by over 1,200, marking 665K numbers of people who died due to the virus.

Following his signals that the deal on the unemployment claims benefit could be reached on Friday, the day of the stimulus’ expiry, US Senate leader Mitch McConnell opens the door to a smaller COVID-19 relief package than the $1.0 trillion proposal unveiled by Republicans earlier this week. This helps the US dollar to recover the multi-year low.

The US dollar index (DXY) slumped to 93.17, the lowest since June 14, 2018, the previous day. The move could be traced from the Federal Reserve’s bearish bias and the increase in the pandemic numbers, not to forget uncertainty over the fiscal package.

Market’s risk-tone sentiment remains sluggish as the US Treasury bonds and stock futures print mild losses whereas stocks in Asia-Pacific mark gains.

Trader may now wait for the US Q2 GDP figures for fresh impulse while keeping eyes on the risk catalysts. While the forecasts suggest -35.1% of figures versus -5.0% prior contractions, any upside surprises could help the greenback to extend the latest pullback.

Technical analysis

A downward sloping trend line from June 04, at 7.0200, followed by a 200-day SMA level around 7.0330, restricts the pair’s near-term upside.