The USD/CNY price dropped for the fifth consecutive day as the market reflected on the latest US GDP and China PMI numbers. It is trading at 6.4680, which is 1.70% below its highest point in March this year.
China strong manufacturing PMI
China is the world’s biggest manufacturer. Its companies sell everything from vests to complicated products like the iPhone and cars. Therefore, the market pays a close attention to manufacturing and services numbers from the country.
Are you looking for fast-news, hot-tips and market analysis?
Sign-up for the Invezz newsletter, today.
Two reports published today showed that the country’s manufacturing sector remained steady in April as global demand rose. According to China Logistics, the manufacturing PMI declined from 51.9 in March to 51.1 in April. This decline was worse than the median estimate of 51.7. Nonetheless, the PMI has remained above 50 for months, which is a sign of growth.
A separate report by Markit showed that the manufacturing PMI rose from 50.6 in March to 51.9 in March. This was better than the median estimate of 50.8. The non-manufacturing PMI dropped to 54.9 while the composite PMI fell to 53.8.
The USD/CNY pair is also reacting to the relatively positive GDP data from the United States and the Fed decision. On Wednesday, the Federal Reserve left interest rates and the asset purchase program unchanged even as the economy continued to do well. The bank also sounded dovish, saying that it will maintain these policies intact for a while. This pushed emerging market currencies like the Chinese yuan, South African rand, and Mexican peso higher.
Later today, the pair will react mildly to the latest US personal income and spending numbers. Economists expect the data to show that personal income rose by 20.3% in March while spending rose by 4.1% because of the stimulus package.
The four-hour chart shows that the USD/CNY pair has been in a strong downward trend lately. This decline has been supported by the 28-day weighted moving average. It is also between the 61.8% and 78.6% Fibonacci retracement levels. Therefore, the path of least resistance for the pair is lower. Still, traders should apply the risk management tools provided by their forex brokers when trading the pair. That’s because, historically, China is known for intervening in the market to devalue the yuan.