USD/CNH: Trade war, Chinese reforms portray bullish exhaustion

• USD/CNH struggles around the record high amid the US-China trade war.
• Upbeat Industrial Profits from China and Beijing fiscal measures exert downside pressure.

With the contrasting signals from the US-China trade tussle and China’s fiscal reforms, Industrial Profits, USD/CNH remains under pressure while taking rounds to 7.1652 on early Wednesday.

As per Tuesday’s release, China’s Industrial Profits surged 2.6% YoY in July from -3.1% in June. However, Beijing didn’t stop taking further measures to counter the US-led trade protectionism as the Xinhua reports release of various plans to increase domestic consumption, including the possible removal of restrictions on auto purchases.

In a reaction, the quote formed a ‘doji’ candle on a daily chart, showing the start of bullish exhaustion.

The prices fail to negate the pressure amid a sustained cold war between the US and China, coupled with fears of global recession as indicated via inversion of the US two-year and 10-year treasury yield curves.

Additionally, the latest news report from South China Morning Post (SCMP) says China’s debt levels stabilized in the second quarter of 2019, giving more room for further fiscal measures by Beijing.

Moving on, a light economic calendar keeps pushing investors to trade/political headlines. Also directing the move will be the US yield curve performance which has been in the spotlight off-late.

Technical Analysis

A four-week-old rising trend-line around 7.1180 limits the pair’s immediate downside, which in-turn signal brighter chances of its run-up to 7.2000 round-figure with the recent high near 7.1838 acting as an intermediate halt during rally.