USD/CNY: Renminbi bottoms ahead of Biden and Jinping meeting

By:
on Nov 15, 2023
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  • The USD/CNY exchange rate has drifted downwards in the past few weeks.
  • China published relatively strong economic data, signaling it is bottoming.
  • President Xi Jinping and Joe Biden will hold a meeting on Wednesday.

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The USD/CNY exchange rate continued its downtrend on Wednesday after the latest US inflation and China economic numbers. The pair crashed to a low of 7.2365, the lowest point since August 14th. It has dropped by over 1.55% from the highest point in 2023.

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China seems to be bottoming

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The USD/CNY pair continued falling as concerns about the Chinese economy eased. In a statement, the National Bureau of Statistics (NBS) showed that the country’s unemployment rate remained unchanged at 5.0%.

Additional data revealed that the country’s retail sales bounced back in October. It soared by 7.6% in October, higher than the median estimate of 7.0%. Retail sales also jumped by 5.5% from the previous month.

The Chinese economy also saw strong industrial production growth. It rose from 4.5% in September to 4.6%, higher than the median estimate of 4.4%. Fixed asset investments rose by 2.9%.

These numbers mean that the recent weakness of the Chinese economy is easing. This view is supported by the recent comeback of iron ore and copper prices. Iron ore was trading at $128.34 on Wednesday, higher than the year-to-date low of $103.55.

Similarly, copper price has jumped to $8,080 from last month’s low of $7,812. These metals are usually good barometers of the Chinese economy because the country is the biggest importer.

Meanwhile, the USD/CNY pair has now dropped because of the falling US dollar index, which has dropped from the year-to-date high of $107.5 to a low of $105.3. The dollar has dropped against other currencies like the Russian ruble, sterling, and the euro.

This performance is because investors have now embraced a risk-on sentiment as US inflation has dropped to 3.2%. The labor market has worsened, with the US unemployment rate rising to 3.9%. 

The renminbi has also risen ahead of an important meeting between Joe Biden and President Xi Jinping. In it, the two leaders will attempt to solve some of the existing challenges and normalise relations.

USD/CNY technical analysis

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USD/CNY chart by TradingView

The USD to CNY exchange rate peaked at a high of 7.3500 on September 8th. This was an important level since it was a few points above the key point at 7.3273, the highest swing in November last year. It has found a strong resistance level around this range.

Now, the pair has dropped below the 50-day and 100-day Exponential Moving Averages (EMA). It has moved below the important support level at 7.2430, the lowest point on 1st September.

Therefore, the outlook of the pair is bearish, with the next support level to watch being at 7.20. The stop-loss of this trade is at the resistance point at 7.3273.

China CNY Copper Joe Biden USD Crypto business Economic Forex Inflation Precious Metals Trading Ideas