The USDCNY exchange rate has bounced after a recent downturn, but the bears remain in control.
USDCNY – Weekly Chart
The USD attempted to breakout above the 7.328 level this year but failed. This was the third major attempt at the level since 2022 and is showing a stubborn obstacle to dollar gains. A larger move would likely take shape above that level or below the 7-7.08 range.
The U.S. dollar strengthened after the release of recent Chinese GDP growth figures. China’s economy delivered a solid 5.3% growth return for the first half of the year, according to data from the National Bureau of Statistics (NBS) released this week.
The economy has shown resilience despite the recent tariffs imposed and remains on course for the government’s 5% target. Analysts polled by Reuters last week had expected softer data and increased pressure on the government to increase its stimulus efforts.
For the U.S. dollar, a recent uptick in inflation has meant that an interest rate cut is unlikely at the FOMC’s July meeting. Inflation jumped by 2.7% year-over-year in June, according to the Bureau of Labor Statistics. That moves inflation further away from the Federal Reserve’s stated goal of 2% inflation each year.
“The heating up of inflation in June, while close to expectations, is a step in the wrong direction that will keep the Federal Reserve on the sidelines at the upcoming July FOMC meeting,” said Scott Anderson, chief economist at BMO Capital Markets.
Following the latest data, expectations for a July 30 rate cut decreased to 2.6% from 6.2% the previous day, according to CME data. The latest bounce in the dollar may not last, and the failed attempts to get above resistance could point to the downside in USDCNY.
The USDX has rebounded from lows of 96.00 to 98.00 and is now targeting a test of the 100.00 level.
