USD/CNY forecast after the weak China Q3 GDP data

The USD/CNY pair rose sharply after the relatively weak China GDP data. The pair rose to a high of 6.4385, which was about 0.25% higher than the lowest level last week. 

China GDP data

The Chinese economy had a rough third quarter as the global supply chain challenge continued. Data compiled by the country’s statistics agency showed that the economy rose by 0.2% in the third quarter after expanding by 1.2% in Q2. This drop was worse than the median estimate of 0.5%. 

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The country’s economy expanded by 4.9% on a year-on-year basis, a sharp decline from the previous expansion of 7.9%. Analysts were expecting the data to show that the economy grew by 5.2%. 

All sectors of the Chinese economy lagged. For example, fixed asset investments grew by just 7.3%, which was lower than the previous 8.9%. 

This trend will likely continue after the collapse of Evergrande, the country’s second-biggest real estate company. Its collapse risks bringing down the property market, which is one of the most important areas of the economy.

Meanwhile, industrial production declined from 5.3% in August to 3.1% in September. This decline was lower than the expected 4.5%. On a positive side, retail sales rose by 4.4% in September while the unemployment rate declined from 5.1% to 4.9%.

The USD/CNY rose because analysts expect that China’s economy will continue struggling in the near term. For one, the country’s real estate sector, which has been its engine for growth, has started weakening. Also, the ongoing supply challenges will affect the flow of goods to and from China.

China is also experiencing an energy crisis because of the prices of coal and natural gas. The crisis has seen some provinces order their factories to slow production.

USD/CNY forecast

The USD/CNY pair has been under pressure in the past few weeks. The pair has dropped from 6.5150 in July to 6.4377. On the daily chart, it has moved below the 25-day moving average while the MACD has been in a downward trend. Therefore, the pair will likely keep falling as bears target the year-to-date low of 6.3580. It is worth noting that the Chinese yuan is highly managed by the PBOC, which can affect its performance.