USD/CNY forecast after strong China retail sales data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Nov 15, 2021
  • The USD/CNY pair has been under pressure lately.
  • China retail sales bounced back by 4.9% in October.
  • The unemployment rate remained steady at 4.9%.

The USD/CNY pair is hovering near the lowest level since June as investors reflected on the relatively strong China economic data. It is trading at 6.3800, which is about 2.1% below the highest level in July this year.

China retail sales

The Chinese economy is going through a rough patch as the country continues battling the new Covid-19 wave. 

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

The country has seen more cases recently while the government has insisted on the zero Covid policy. This involves large scale lockdowns. Indeed, the country’s Covid czar emphasised that the government will maintain the policy in the coming months.

Meanwhile, China is facing tough challenges as energy prices soar. In the past few months, coal and natural gas prices have jumped substantially. As a result, the government has at times asked the private sector to limit its work during peak hours.

Still, data published by the National Bureau of Statistics show that the country’s economy is doing relatively well. For example, China’s retail sales bounced back by 4.9% in October. This was a better performance than the median estimate of 3.5%. It was also a relatively worse performance than the previous 4.4%.

Meanwhile, data showed that the country’s industrial production rose by 3.5% in October. This was also better than the median estimate of 3.0% and the previous 3.1%. 

The USD/CNY pair also declined after the relatively strong China unemployment rate data. The country has an unemployment rate of 4.9%. Additional data showed that the country’s fixed-asset investments declined from 7.3% in September to 6.1% in October.

The USD/CNY has dropped at a time when the US dollar index is hovering near its highest level in months. This rally has happened even as worries of stagflation remain.

USD/CNY technical analysis

USD/CNY

The daily chart shows that the USD/CNY pair has been under intense pressure in the past few weeks. The pair has dropped by more than 2% from June. As a result, it has moved below the 25-day and 50-day moving averages. It is also approaching the key support level at 6.355, which was the lowest level this year. 

Therefore, the pair will likely have a major bearish breakout in the coming days. This will however depend on China’s central bank overall fixing rate.

Where to buy right now

To invest simply and easily, users need a low-fee broker with a track record of reliability. The following brokers are highly rated, recognised worldwide, and safe to use:

  1. Etoro, trusted by over 13m users worldwide. Register here >
  2. bitFlyer, simple, easy to use and regulated. Register here >