Jump to content

USDCNH and GBPCNH at risk as Chinese PMI data signals Chinese resurgence


Recommended Posts

A raft of strong Chinese PMI surveys signal a strong economic recovery taking shape. Will this bring a resurgence for the Chinese Yuan?

bg_china_flag_hong_kong_gettyimages_1319Source: Bloomberg
 
 Joshua Mahony | Senior Market Analyst, London | Publication date: Wednesday 01 March 2023 

Chinese PMI data signals strong rebound

The Yuan has been on a tear this morning, following a trio of impressive PMI readings out of China. Understandably markets have been curious over exactly how the Chinese recovery was going to take shape following an extended period of zero-Covid restrictions that stifled growth. Up until now, we have seen precious little sign of a major economic boom in the country, with rising interest rates putting pressure on economic growth and demand around the world. However, today has seen that shift, with Chinese factory activity reaching a decade high as services jumped to a lofty 56.3. Notably, the SME-focused Caixin manufacturing PMI figure managed to rise into expansion after six-months of contraction. For markets this is good news, helping to lift growth and demand expectations in a difficult year.

ChinapMI1323.pngSource: TradingEconomics

Understandably, the mix of a wider risk-on move coupled with expectations of Chinese strength brought downside for USDCNH. Coming off the back of a rally into the 7.0127 resistance level, we have seen price reverse sharply lower once again. This has also seen the stochastic finally break through trendline support, reversing out of the overbought territory. Could this be the beginning of a fresh bearish phase for the pair?

USDCNH-Daily-2023_03_01-13h05.pngSource: ProRealTime

The four-hour chart highlights how this recent uptrend does still remain in play for now. While we have seen price collapse through all Fibonacci support levels, we remain above the key swing low of 6.8545. A break below that point would provide us with greater confidence that we could be set for a protracted period of Yuan strength.

USDCNH-4-hours-2023_03_01-13h08.pngSource: ProRealTime

However, it is worthwhile noting that we remain at risk of a major turn in risk attitudes given the gains seen for stocks of late. With that in mind, any significant selloff in equities would bring about a dollar resurgence. In such a case, it may make sense to look at the likes of GBP/CNH for a shorting opportunity if we do see support taken out. The daily chart highlights how price is falling back down from the 8.4234 resistance level. A break below the 8.2093 swing low level would bring about a fresh sell signal, with 8.1317 particularly giving way to a wider continuation of the bearish trajectory seen in December 2022. The breakdown in the stochastic has seen price break through the 80 threshold. From a historical perspective, this has typically preceded a significant period of downside for the pair.

GBPCNH-Daily-2023_03_01-13h21.pngSource: ProRealTime
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Join the BYDFi Demo Trade Profit Posting and grab your chance to share in a 10,000 USDT prize pool!  Show off your trading skills, post your profits, and let's see who comes out on top! Don't miss out on this chance to win big! 🎉
    • The #meme hype surrounding #Solana may have slowed down with the emergence of the Ton network, but it seems that the enthusiasm for Solana is not fading away entirely. While new networks like Ton are gaining attention, Solana has previously generated significant interest and wealth for investors. However, there are concerns about scammers exploiting the Solana network with various honeypot and rugpull schemes, leading some traders to explore other chains like Base and Ton. Despite the rise of Ton blockchain, a new Solana meme project associated with Pepe the Frog has started to gain traction. One such project, LandWolf, has already amassed over 5,000 active Telegram members and 5,000 Twitter followers, indicating early interest and community engagement. The project aims to unite Pepe fans with the broader crypto community, offering a unique value proposition. LandWolf's ability to secure listings on top-tier exchanges like Bitget showcases the developer's influence and the project's potential. Some enthusiasts have already dubbed $WOLF as the biggest meme coin on Solana, highlighting the ongoing interest and excitement within the Solana ecosystem.
    • Meme coins are cryptocurrencies inspired by internet jokes, like Dogecoin. They're inherently risky due to their extreme price swings. While some meme coins remain purely for fun, others are trying to develop actual uses in gaming or finance. These high-risk, high-reward investments often attract "degenerates" (or "degens") who chase quick profits by jumping into unproven projects without much research.   The potential for massive returns with meme coins can't be ignored, however. Dogecoin's 9800% surge in 2021 exemplifies this. A $100 investment could have turned into a life-changing $9800. This experience highlights the potential regret of focusing solely on "safe" investments with lower potential returns.   Taking inspiration from this, some experienced investors are now allocating a small portion of their portfolio to latest meme coins.one of the latest is Miggles listed on Bitget. This strategy allows them to potentially benefit from future bull runs while limiting their overall risk.
×
×
  • Create New...
us