China continues to be pressured by deflation.

The yuan remains stable at a rate of 7.20 yuan per dollar due to indications of sustained monetary tightening pressure in China. This suggests that the country's economy is still affected by internal vulnerabilities. Investors are closely monitoring additional economic data this week and the special interest rates used for borrowing from China's central bank in the upcoming week to make future investment decisions.

Furthermore, the yuan's value is still under pressure due to the strengthening of the US dollar, prompted by stronger-than-expected job data, conflicting with predictions that the Federal Reserve might start a rapid interest rate cut as early as March 2024.

China's inflation rate dropped by 0.5% on a yearly basis in November, a larger decrease compared to the market's anticipation of a 0.1% decline. This decrease was largely influenced by a significant 4.2% decline in food costs, marking the highest drop in two years. However, inflation rates in other sectors saw only marginal increases, barely affecting overall inflation.

Food prices in China decreased by 4.2% compared to the previous year, marking five consecutive months of decline. Pork prices notably decreased by a rapid 31.8%, indicating a significant slowdown. Additionally, high supplies since the Golden Week holiday and above-average temperatures have led to continuous decreases in prices for other meats and animal products. However, prices for fresh vegetables and fruits have slightly edged up.

China's trade surplus increased to $68.39 billion in November due to rising exports and a decrease in imports caused by sufficient domestic supplies. Imports dropped by 0.6%, totaling only $223.54 billion, mainly due to selective domestic demand and adequate supplies. As a result, the government continues continuous economic stimulus measures to further revitalize domestic demand.

Chinese exports increased by 0.5% annually, totaling $291.93 billion, surpassing market expectations of a 1.1% decline. Most exported goods remain steel and rare earth elements, accounting for up to 40% of exports. There was an increase in exports to the United States and Taiwan. However, despite the increase in exports to the US, the trade surplus decreased to $29.8 billion.

Techical analysis data (5H)

Resistance: 7.1852, 7.1878, 7.1909

Support: 7.1796, 7.1764, 7.1739

Source: Investing.com