USD/CNH Price Analysis: Yuan pair extends pullback from 7.2370-80 monthly resistance after China inflation

• USD/CNH prints the first daily loss in four after China inflation data for July.
• Improvement in PPI supersedes downbeat CPI data to allow Yuan to pare recent losses.
• MACD, RSI keep buyers hopeful of poking multi-month-old descending resistance line.
• 21-DMA, fortnight-old rising support line restricts immediate downside of USD/CNH.

USD/CNH renews its intraday low near 7.2220 while reversing from a one-month-old horizontal resistance during early Wednesday. In doing so, the offshore Chinese Yuan (CNH) pair gives more importance to the improvement in the factory-gate inflation than the consumer price increase, as well as cheer the market’s stabilization, while snapping a three-day losing streak.

That said, China’s headline inflation gauge, namely the Consumer Price Index (CPI), declines to -0.3% YoY versus -0.4% YoY expected and 0.0% prior whereas the Producer Price Index (PPI) improves to -4.4% YoY compared to -4.1% YoY market forecasts and -5.4% previous readings.

Technically, the latest pullback remains elusive amid bullish MACD signals and an upbeat RSI (14) line.

Also challenging the short-term USD/CNH bears are the 21-DMA and a fortnight-long rising support line, respectively near 7.1815 and 7.1760.

Following that, the upward-sloping trend line from early May and February, close to 7.1480 and 7.0990 in that order, will be in the spotlight.

On the contrary, a daily closing beyond the aforementioned monthly horizontal resistance near 7.2370-80 could quickly propel the USD/CNH pair towards a descending trend line from late October 2022, surrounding 7.2730 by the press time.

In a case where the offshore Chinese Yuan manages to cross the 7.2730 hurdle, the yearly top marked in June near 7.2860 will act as the last defense of bears.

USD/CNH: Daily chart

Trend: Further upside expected