The USD/CNY price declined after the strong economic data from China. It dropped to 6.4600, which was 1.80% below the highest point in March.
China growth accelerated
China has emerged as the biggest winner of the coronavirus pandemic. It was the first major economy to return to growth, when the country expanded in the second quarter of last year. The country has done well because the government handled the pandemic well. Most importantly, as other countries placed lockdowns, many businesses boosted their purchases from China.
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According to the government, exports increased by 32.3% year-on-year in April after rising by 30.6% in March. The increase was significantly above the median estimate of 24.1%. In the same period, imports increased by 43.1% from 38.4% in March. As a result, the trade surplus expanded to more than $42.86 billion from the previous $13 billion.
These numbers show that the country’s economy is not slowing any time soon. In fact, the biggest challenge is that most shipping companies are now operating at full capacity. There is also a lot of traffic at important ports like in California and Amsterdam. As the US plans a major infrastructure plan, Chinese exports could soar.
The USD/CNY pair is also reacting to the strong performance of the services sector. According to Caixin, the services PMI increased from 54.3 in March to 56.3 in April. Any reading above 50 is usually a sign of expansion. The figure is notable because the services sector is one of the biggest employers in China.
Later today, the USD/CNY will react to the US non-farm payroll numbers that will come out later today. Economists at most forex and CFD brokers expect the data to show that the country continued to add thousands of jobs in April. In fact, the challenge many employers are facing is not finding enough workers.
USD/CNY technical forecast
The daily chart shows that the USD/CNY price has been under pressure this month. The pair declined below the 25-day and 15-day exponential moving averages (EMA). The Relative Strength Index (RSI) has dropped from the overbought level of 74 to an oversold level of 25. The pair may continue dropping as the market targets the support at 6.4200.