The renminbi crash continued this week ahead of major economic events in the US and China. couple USD/CNY It rose to a high of 7.15 on Tuesday, the highest level since November last year. The closely related USD/CNH pair rose to 7.1698. Overall, the Chinese yuan has fallen nearly 4% this year.
US inflation, Fed decision, China data
The renminbi has been falling sharply in recent months as hopes for a quick recovery from China have faded. Recent data shows that key areas of the economy such as real estate and manufacturing are struggling. In this article I mentioned that China’s exports and imports have declined.
Therefore, traders will want to focus on upcoming economic data from China. On Thursday, the Statistics Office will release the latest figures on industrial production, investment in fixed assets and retail sales. Economists believe the numbers show the country’s growth slowed in May.
A weak Chinese yuan is not entirely bad for the country’s economy. As the world’s largest exporter, a weak renminbi makes it easier for its companies to do business. In the past, China has been accused of deliberately devaluing its currency.
Big news about forex US consumer inflation numbers due on Tuesday. Economists polled by Reuters said inflation in the country eased slightly in May, helped by a stronger dollar and falling oil prices.
The numbers are significant because they come just hours before the Federal Reserve begins its two-day monetary policy meeting. At that meeting, analysts believe the committee will decide to keep interest rates and quantitative tightening (QT) unchanged.
An aggressive Fed would push the USD/CNY pair higher. On the other hand, if the central bank offers relatively moderate interest rates, it will push the pair much lower.
USD/CNY Technical Analysis
The renminbi has been on a downward trend for the past few months. In the chart above, we can see that the USD/CNY pair managed to break through the key resistance at 7.0239 to the May 2022 support level. The pair’s uptrend is supported by the 50-day exponential moving average (EMA). Approaching the 78.6% retracement level.
Therefore, the path of minimum resistance for the Chinese Yuan is lower, the next level should be seen at 7.20, the 78.2% retracement level. Initial support for this pair is 7.1.
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