USD/CNH has dropped 1.4% so far in October and is on track for a fifth straight monthly decline. The strength in Chinese yuan is reinforced by the contrast in coronavirus situation in China and the rest of the world. While the Chinese economic activity is gradually returning to normal, there is a resurgence of new Covid-19 cases in Europe and the US, and some European countries are reimposing lockdowns.
Meanwhile, China’s official PMIs for October will be released on Saturday (October 31), which are expected to be broadly unchanged at recent high. Caixin China Manufacturing PMI will be reported next Monday (November 2), which is expected to be down slightly to 52.8.
From a technical point of view, USD/CNH is extending its bearish run as shown on the daily chart. Previously, it has formed a double-top pattern, with the neckline broken. The level at 6.8500 maybe consider as the nearest resistance, while the 1st and 2nd support are expected to be located at 6.6300 and 6.4900.