The offshore yuan (CNH) has hit a new low for 2023, with the USDCNH reaching a high of 6.9981, surpassing the previous high of 6.9951 from March 8. This movement was partly influenced by overnight economic data from China, which painted a concerning picture of a slowing economic recovery.
Key indicators fell short of expectations. Fixed Asset Investment, expected to increase by 5.7% year-to-date/year-on-year, only grew by 4.7%, down from the previous 5.1%. Industrial Production year-on-year was 5.6%, well below the projected 10.9% and slightly higher than the previous 3.9%. Retail Sales year-on-year expanded by 18.4%, failing to meet the anticipated 22.0% growth, but still outpacing the previous 10.6% rate.
Data released last month on factory data also demonstrated contraction.
The Caixin China general manufacturing purchasing managers' index fell to 49.5 and the National Bureau of Statistics' manufacturing PMI dropped to 49.2. Below 50 is indicative of contraction in the economy. In contrast, services remained a bright spot in the economy. The Caixin services PMI was 56.4, which was still lower than March's reading but still indicating expansion (above 50). The non-manufacturing PMI was also at 56.4, slightly below expectations but still demonstrating growth.
The Unemployment Rate showed a marginal improvement to 5.2%, better than the anticipated and previous figure of 5.3%. Despite this positive, the overall data suggests that China's initial post-COVID recovery might be losing momentum, inciting concern among traders. It's important to note that these figures are being compared to a period of COVID restrictions when growth was slower, and the market was expecting more robust gains with the reopening.
Looking at the daily chart, the USDCNH is trading at its highest level since December 28, moving further away from its 200-day moving average currently at 6.96145. The price has been fluctuating around this moving average over the past four trading days. The recent move above the 200-day moving average indicates a more bullish outlook. The next key target on the daily chart is the swing high from December 22 at 7.01496. Above that, traders may start to look towards the 50% midpoint of the downward move from the 2022 high, which is 7.03562.
Buyers are making a play in the USDCHN today with the move above and away from the 38.2% retracement and the the 200-day MA. New 2023 highs now open the next door toward 7.0000 and other upside targets. Buyers in the USD are taking more and more control vs the CNH.
