The renminbi is in a downward spiral that continues to worry about the Chinese economy. The USD/CNY exchange rate was in an uptrend and traded at 7.0660, the highest level since December 2022. In total, the pair is up 5.36% this year and 12% from the lower level than 2022.
Chinese recovery care
All earlier this year China’s recovery had been excellent. This improvement came as the country ended its restrictive Covid-19 policies that led to substantially slower growth in 2022. The government has also decided to end some of its regulatory crackdown on tech companies.
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Now I am not worried about what I have been waiting for. On the other hand, the real estate industry, which has long supported the Chinese economy, is still not doing well. Recent data shows that house prices have slowed for months and land sales have fallen.
The stock market also points to a slowdown in the Chinese economy. Copper, often seen as a barometer of the economy, has fallen, as I wrote here. Similarly, other commodities such as crude oil, natural gas, and coal also fell this year. Ideally, these products tend to rise when the Chinese economy grows.
Official figures also point to a slowdown in the economy. Earlier this month, government data showed industrial production fell in April while the youth unemployment rate rose after a pause. In a statement, Quincy Krosby, LPL Financial’s global chief executive, said:
“The yuan, along with the weakness in industrial metals, signaled continued vulnerability in the Chinese economy as authorities geopolitical tensions, youth unemployment, summer housing, and market-obedient and municipal governments, equally hampered by high levels of debt.
The USD/CNY pair also rallied due to the strong US dollar index. Data showed that the DXY Index jumped to $104.1, above the 1,900-year high of $100.87.
USD/CNY Technical Analysis
USD / CNY Chart from TradingView
The USD/CNY fixed rate has been in a strong upward trend in recent days. It could move above the crucial resistance point below 6.9765, the high on February 28. The pair jumped above the 20-day and 50-day exponential moving averages, while the RSI jumped to the overbought 80 level.
Therefore, the pair is likely to continue higher as buyers buy the key resistance at 7.20. A move below support at 6.97 will weaken the bullish sentiment.
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