USD/CNY forecast as China economy stages a comeback

By:
on Jun 10, 2022
  • The USD/CNY pair has risen for four straight days.
  • China exports, imports, and surplus was better than estimates.
  • The country’s inflation is more stable than other countries.

The USD/CNY pair rose for the fourth straight day after the latest Chinese trade and consumer inflation data. It rose to a high of 6.6934, which was the highest level on June 2nd this year. It has risen by almost 1% from its lowest level this week.

China economy recovery

The Chinese economy is doing relatively well even after the recent lockdowns. On Thursday, data by the customs agency showed that the country’s exports rose sharply in May even as the lockdowns continued. Exports rose from 3.9% to 16.9% on a year-on-year basis. This increase was better than the median estimate of 8.0%.

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Meanwhile, the country’s imports rose by 4.1% in May, which was also better than the median estimate of 2.0%. This increase was better than the median estimate of 2.0%. As a result, the total trade surplus expanded from $51.12 billion in April to over $78.76 billion. 

The USD/CNY is reacting to the Chinese inflation data. According to the statistics agency, China’s inflation declined in May. On a month-on-month basis, the country’s inflation declined from 0.4% in April to -0.2% in May. On a year-on-year basis, inflation rose by 2.1%, which was lower than other countries like the United States and the UK.

Meanwhile, other data shows that the country’s outstanding loan growth continued rising in May. Outstanding loans rose from 10.9% to 11% in May. Further, new loans almost doubled from 645 billion yuan to over 1.89 trillion yuan. This is a sign that the economy is doing well.

The next key catalyst for the USD/CNY will be the US inflation numbers. Analysts expect the data to show that the US inflation declined from 8.3% in April to 8.2% in May while core inflation fell from 6.2% to 5.9%.

USD/CNY forecast

USD/CNY

The USD/CNY pair found a strong support at 6.640, which was the lowest level since May 5th. It has now moved above the 25-day and 50-day moving averages while the Average True Range (ATR) has moved slightly lower. 

Therefore, there is a high possibility that the pair will continue rising as bulls target the key resistance level at 6.8. A move below the key support level at 6.50 will invalidate the bullish view.

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