USD/CNY: Oversold pair sees little action after PBOC’s status quo rate decision

• USD/CNY lacks a clear directional bias on Monday. 
• The PBOC keeps one- and five-year interest rates unchanged. 
• The pair looks oversold and due for a corrective bounce. 

The People’s Bank of China’s (PBOC) decision to keep interest rates unchanged fails to elicit a reaction from the USD/CNY pair. 

The central bank retained one and five-year loan prime rates (LPR) at 3.85% and 4.65%. 

A status quo decision was expected, given the recent improvement in the forward-looking economic indices. For instance, the Caixin China purchasing managers index, which focuses on small, private manufacturers, rose to a nine-year high of 53.1 in August from 52.8 in July.

As such, the CNY hasn’t seen notable moves since the rate decision. The USD/CNY pair is trading in the sideways manner near 6.7636 at press time. The pair has declined by over 5% since topping out at 7.1766 in May. 

The 14-day relative strength index is hovering below 30 or in the oversold region for the fourth straight week. Therefore, a corrective bounce could be in the offing. 

The case for a bounce would strengthen if the US stocks extend the recent risk aversion, boosting the greenback’s haven demand. The futures tied to the S&P 500 are currently down 0.20%. 

The official data released Friday showed speculators boosted their short positions in the tech-heavy Nasdaq 100 to the highest level since 2008 int he week ended Sept. 15. 

Technical levels