USD/CNY drops to June 2018 low as China unemployment rate falls
- The USD/CNY price dropped to the latest unemployment, fixed asset investment, and industrial production.
- China's unemployment rate fell from 5.4% to 5.3% while fixed asset investment rose to 1.8%.
- Industrial production rose by an annualised rate of 6.9%.
The Chinese economy is firing on all cylinders as evidenced by the latest fixed asset investment, unemployment rate, and retail sales numbers. That has pushed the Chinese yuan to the highest level against the US dollar since June, 2018. The USD/CNY is trading at 6.5800.
China robust economic data
Last month, the Chinese bureau of statistics released robust third quarter economic data from China. The numbers showed that the economy expanded by 4.9% in Q3 after expanding by 3.2% in the second quarter. That made China the best-performing major economy in the world.
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Today, more data showed that the economy continued to do well at the start of the fourth quarter. The numbers showed that fixed asset investments, which are essential component of the GDP, increased by 1.8% in October. That was a better performance than September’s increase of 0.8% and the median estimate of 1.6%.
The industrial sector was also robust as production rose by 6.9%. Forex investors, using data compiled by Reuters, were expecting the production to rise by 6.5%. From January to October, the industrial production rose by 1.8%.
Retail sales rose by 4.3% in October while the unemployment rate dropped from 5.4% to 5.3%. In comparison, the unemployment rate in the United States is more than 7%. The same is true in other European countries.
Other recent numbers from China have also provided evidence of the strength of the economy. For example, early this month, data by Caixin and Markit showed that the manufacturing and services PMIs remained in expansionary zone in November. The manufacturing PMI rose to 53.6 in October, the sixth month of straight gains. Similarly, the services PMI also rose to 56.8.
Weaker dollar in focus
The USD/CNY is also falling because of the overall weaker US dollar as vaccine hopes dampen virus surge fears. The dollar index, an important gauge that compares the greenback against key peers, is down by 0.20% today. It is trading at $92.56.
This weakness is mostly because investors are still reacting to last week’s vaccine news by Pfizer and BioNTech about the efficacy of their vaccine. Analysts believe that other vaccine developers like AstraZeneca and Novavax are also close to publishing their test results. As such, a vaccine will help to flatten the curve and bring the economy back to normal.
USD/CNY technical outlook
On the daily chart, the USD/CNY price has been on a strong downward trend. It has declined by almost 8% since May this year. This decline has been supported by the 25-day and 15-day weighted moving averages. It has also managed to move below the important support at 6.8400 and 6.6719. Therefore, at this level, the path of least resistance for the pair is lower, with the next target to watch being at 6.5500.