- The USD/CNY declined to the lowest level since May 2019 after strong Chinese data.
- China’s retail sales rose by 0.5% in August, turning positive for the first time this year.
- Industrial production, unemployment rate, and fixed asset investments were all positive.
The USD/CNY pair declined to the lowest level since May 2019 as the market reacted to a series of strong economic data from China. The pair is trading at 6.7860 and is in its eighth straight weeks in the red. It has fallen in 14 of the past 16 weeks.
China reports strong economic data
The Chinese economy has bounced back from its deep contraction early this year. The economy expanded by 3.2% in the second quarter while other countries like the US, UK, and the Eurozone recorded their worst slowdown in decades.
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The country’s economy is continuing to recover in the third quarter. According to the country’s statistics office, retail sales turned positive for the first time this year in August. The sales rose by 0.5% after falling by 1.1% in the previous month. Analysts were expecting the sales to rise by just 0.1%. The sales were driven by a 25.1% increase in communication equipment and 11.8% of autos. Still, the sales were down by 8.6% in the first eight months of the year.
Another data showed that the unemployment rate improved to 5.6% in August. That was 0.1% better than in the previous month. In contrast, the US unemployment rate declined to 8.4% during that month while the EU rate is above 7%.
The USD/CNY also reacted to strong industrial production data. According to the bureau, the industrial production rose by 5.6% in August. That was better than the previous month’s increase of 4.8%. It was also better than the 5.1% that analysts were expecting. The production rose by 0.4% from January to August.
Fixed asset investments declined by 0.3%, which was better than the previous decline of 1.6% and the consensus estimates of a 0.4% decline. This number measures the amount of money that companies have invested in fixed assets like machinery and buildings.
The numbers released today show that the Chinese economy is firing on all cylinders. It has achieved this by the early measures the government took to curb the illness.
USD/CNY technical outlook
The USD/CNY pair is trading at 6.7860. The weekly chart shows that the pair has been in a steep decline after it reached a year-to-date high of 7.1775. The price has moved below the 38.2% Fibonacci retracement level. It is also below the 50-day and 100-day exponential moving averages. Also, the RSI has moved to the oversold level of 23. Therefore, it seems like bears are in total control, which means that the pair is likely to continue falling.