Forex Market: USD/CNH daily trading outlook

Yesterday’s trade saw USD/CNH within the range of 6.5430-6.5591. The pair closed at 6.5522, inching up 0.13% on a daily basis. It has been the 10th gain in the past 21 trading days and also a fifth consecutive one. In addition, the daily high has been the highest level since February 10th, when a high of 6.5698 was registered. USD/CNH fell 0.64% in February, which has been the first drop in the past four months.

At 7:58 GMT today USD/CNH was edging down 0.11% for the day to trade at 6.5448. The pair touched a daily low at 6.5404 at 6:15 GMT, overshooting the lower range breakout level (S4), and a daily high at 6.5560 during early Asian trade.

On Tuesday USD/CNH trading may be influenced by the following macroeconomic reports as listed below.

Fundamentals

United States

Manufacturing PMI by Markit – final reading

The final estimate of the Manufacturing Purchasing Managers Index for February probably confirmed the flash estimate of 51.0, which was reported on February 22nd. If so, it would be the lowest index level since October 2012, when a final reading of 51.0 was reported. In January the final seasonally adjusted PMI stood at 52.4, inching down from a preliminary value of 52.7.

According to the preliminary report by Markit, ”Manufacturers overwhelmingly linked the slowdown to softer underlying demand patterns in February, while only a small minority cited temporary weather related disruptions. There were reports that weaker business sentiment, alongside uncertainty about the general economic outlook, had encouraged clients to delay spending decisions during the latest survey period.”

”Softer demand patterns contributed to a renewed decline in pressures on operating capacity across the manufacturing sector during February. This was highlighted by the sharpest reduction in backlogs of work since September 2009.”

”Input buying fell in February, thereby ending a 27-month period of expansion, while manufacturers’ finished goods inventories built up for the third month running. Employment growth was maintained in February, although the rate of job creation was one of the weakest seen over the past three years”, Markit stated.

Values above the key level of 50.0 indicate optimism (expanding activity). In case the final PMI for January confirmed or came above the preliminary reading, this would cause a moderate bullish impact on the US dollar. The final reading is due out at 14:45 GMT.

Manufacturing PMI by the ISM

Activity in United States’ manufacturing sector probably improved in February, with the corresponding manufacturing PMI coming in at a reading of 48.8, according to expectations, up from 48.2 in December and January. The latter has been the lowest PMI reading since June 2009, when the gauge was reported at 44.8.

The New Orders Index came in at 51.5 in January, up from 48.8 in December. The sub-gauge of production was reported at 50.2, advancing from 49.9 in December. The index of employment slid to a value of 45.9 in January from 48.0 in the preceding month. The gauge of prices was at 33.5 in January, matching the reading in December, which suggested lower prices of raw materials for a 15th month in a row. In January, 8 manufacturing industries reported growth and 10 reported contraction in overall business activity, according to the report by the Institute for Supply Management (ISM).

In case the manufacturing benchmark improved more than anticipated in February, this would have a strong bullish effect on the US dollar. The Institute for Supply Management (ISM) is to release the official reading at 15:00 GMT.

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the daily pivot levels for USD/CNH are presented as follows:

R1 – 6.5537
R2 – 6.5552
R3 (range resistance) – 6.5566
R4 (range breakout) – 6.5611

S1 – 6.5507
S2 – 6.5492
S3 (range support) – 6.5478
S4 (range breakout) – 6.5433

By using the traditional method of calculation, the weekly pivot levels for USD/CNH are presented as follows:

Central Pivot Point – 6.5365
R1 – 6.5529
R2 – 6.5619
R3 – 6.5783

S1 – 6.5275
S2 – 6.5111
S3 – 6.5021