FxWirePro: USD/CNY edges lower, bearish setup remains

• USD/CNY edged lower on  Monday   as yuan firmed, despite the central bank setting a weaker-than-expected daily midpoint, as subdued demand for the dollar continued to support the Chinese currency.

• The dollar’s six-currency index was little changed at 99.17 as traders turned their attention to this week’s U.S. inflation data for further clues on the Federal Reserve’s interest-rate path.

•The focus on inflation comes after Friday’s stronger-than-expected nonfarm payrolls report increased expectations for a September Fed rate hike, with markets now pricing roughly a 57% chance of a move...

• Before the market opened, the PBOC set the yuan’s daily midpoint at 6.7795 per dollar, 709 pips weaker than   estimate.  

• Chinese banks have been raising dollar deposit rates and using the additional dollar liquidity to buy U.S. Treasuries, a strategy that could help limit the yuan’s appreciation by encouraging customers to retain funds in dollars rather than convert them into yuan.

•  Immediate resistance is located at 6.726(SMA20), any close above will push the pair towards 6.738(38.2%fib)

• Support is seen at 6.708(23.6%fib) and break below could take the pair towards 6.699(Lower BB).

Recommendation: Good to sell around 6.710, with stop loss of 6.740 and target price of 6.690