Categories: Market Overview

Chinese economy slowdown spooks markets and presses CNY

The statistics released from China today raise concerns about the economy’s near-term prospects, preventing the USDCNH from bucking the uptrend.

July data showed a slowdown in retail sales growth from 3.1% y/y to 2.7%, in stark contrast to the average forecasted acceleration to 5.0%. Industrial growth slowed from 3.9% YoY to 3.8% vs 4.5% expected. Fixed-asset investment slowed from 6.1% YoY to 5.7% YoY.

The People’s Bank of China reacted quickly to the statistics by reducing its annual lending rate by 0.1 percentage point to 2.75%. More remarkable, though, is the speed of the reaction, not its scale.

The short-term technical picture of the yuan is now on the sellers’ side. The USDCNH got support from the buyers last week on the way down to the 50-day moving average, which was just above the 76.4% Fibonacci retracement of the February-May rally.

The intraday rise of 0.8% that we see today indicates the determination of the yuan sellers and could signal the second act of growth with a potential target at 7.16, near where the 161.8% levels of the said rally and the multi-year highs of the pair set in 2019 and 2020 are concentrated.

The FxPro Analyst Team

The FxPro Analyst Team

Our team consists of financial market experts. Our dedicated professionals prepare reviews on the foreign exchange market situation, Crude Oil, Gold and Stock Indices. All the analysts are regularly published in the world leading economic media.

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