USD/CNY forecast as more signs for China slowdown emerges
- The USD/CNY pair was in a tight range in early trading on Thursday.
- China reported that manufacturing activity declined in August.
- Manufacturers are facing the challenge of higher costs and shipping.
The USD/CNY pair remained in a tight range after the relatively mixed China economic numbers. The pair is trading at 6.4680, which is slightly above the monthly low of 6.4323.
China economy slowing
After staging a strong pandemic rebound, there are signs that the Chinese economy is starting to slow down. Data published by China Logistics showed that the Chinese manufacturing PMI declined from 50.1 in August to 49.6 in September. This decline was worse than the median estimate of 50.1.
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Another data by Caixin showed that the manufacturing PMI moved up slightly from 49.2 in August to 50.0 in September.
In general, these numbers show that the Chinese economy is not as vibrant as it was a few months ago. Indeed, data published this week showed that the country’s industrial profits dropped in August. Industrial production has also declined for several consecutive months.
There are several reasons why China’s economy is slowing. First, there is an ongoing challenge in the shipping industry. There are not enough ships to meet the rising demand, which has slowed the amount of goods sold to China.
Second, the cost of doing business in China and other countries has been rising, For example, the price of key inputs like aluminium has jumped significantly in the past few months. Similarly, other inputs like steel and nickel have remained being expensive.
Third, recently, China has faced significant power shortages that have affected the country’s economy. The shortage has been affected by the rising costs of natural gas and coal. As a result, the government has even asked many factories to reduce their power consumption.
Therefore, there is a likelihood that the Chinese slowdown will continue. Looking ahead, the USD/CNY pair will react to the latest America GDP data and initial jobless claims numbers.
The USD/CNY pair has been in a tight range in the past few weeks. The pair is trading at 6.4670, which is along the 25-day and 50-day moving averages. The Relative Strength Index (RSI) and other oscillators are at a neutral level. Therefore, the pair will likely remain in this range for a while.
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