USD/CNY: Renminbi recoils as China trade surplus plunges

The renminbi continued its downward trend against the US dollar after the weak trade numbers. The USD/CNY price jumped to 7.11 on Wednesday morning, its highest level since November 2022. The pair has jumped by more than 6% from the lowest level in 2022.

China exports dive

The Chinese economic recovery has turned into a mirage, as I wrote here. Data published by the statistics agency showerd that exports and imports dipped in May, dealing a blow to Xi Jinping. 

Exports crashed by 7.5% in May, worse than the expected expansion of 8.0%. The economy had expanded by 8.5% in the previous month. This decline was the worst report since December when exports crashed by 9.9%. 

Meanwhile, the country’s imports dropped by 4.5% in May after falling by 7.9% in the previous month. This decline was better than the median estimate of 8.0%. As a result, the trade surplus narrowed to $65.81 billion, the worst figure since April 2022.

These numbers add to the concern that the Chinese economy is not doing well and that it will not reach Beijing’s goal of 5% growth this year. Recent numbers like industrial production and manufacturing PMIs have all missed estimates.

As a result, Beijing is said to be considering measures to stimulate the economy. As I wrote recently, the government is considering ways to boost the vital real estate industry, which has collapsed in the past few years. Some of the measures being considered are to reduce commissions and the downpayment required to buy a home. There are concerns about whether these measures will work.

USD/CNY technical analysis

The USD to CNY exchange rate has been in a strong bullish trend in the past few months. And it seems like the weaker Chinese yuan is not boosting exports as it is expected. The pair has jumped above the 50-period moving average. It is also comfortably above the crucial resistance point at 7, the highest point on March 8.

The Awesome Oscillator has moved above the neutral point while the Relative Strength Index (RSI) is moving sideways. Therefore, the pair will likely continue rising in the coming days as buyers target the next resistance point at 7.25.