China may cut interest rates within this year.

The yuan remains stable at around 7.15 yuan per US dollar, despite facing pressure from the strengthening dollar. Investors are beginning to temper their expectations regarding the central bank's rate cuts in the early part of the year. Economic indicators revealed that China's manufacturing activity continued to grow, albeit at a slower pace. This suggests that the People's Bank of China (PBoC) might introduce additional policy easing measures to support the fragile economic recovery. It is anticipated that the PBoC may reduce interest rates or adjust reserve requirements in the first half of this year.

The Manufacturing Purchasing Managers' Index (PMI) rose to 50.8 in December, marking the second consecutive month of expansion. New orders increased, although new export orders experienced a slight decline. However, employment decreased for the fourth consecutive month, indicating a continuous downward trend. Supply chain issues persisted due to shortages of some raw materials and constrained production capacity. Intensified market competition limited companies' ability to raise prices, resulting in decreased profits.

The Services PMI increased to 52.9 in December, representing the fastest growth in service activity since July. This growth was primarily driven by a rapid increase in new orders. Additionally, employment saw its first increase in three months. However, cost pressures remained high due to continuous upward pressure on raw material prices and labor costs.

China's foreign exchange reserves increased to $3.238 trillion in December from $3.172 trillion the previous month, marking the fastest increase since 2021. Meanwhile, China's gold reserves rose to $148.23 billion, indicating continued gold purchases.

The yield on China's 10-year government bonds remained below 2.60%, the lowest in four months. This is because the People's Bank of China kept interest rates unchanged in December, maintaining the lending rates for one-year and five-year loans at 3.45% and 4.2%, respectively. Analysts predict that China's liquidity conditions and the sluggish economic recovery will necessitate further monetary policy easing this year. China's stimulus efforts will continue to boost domestic demand and foster stable growth.

Techical analysis data (5H)

Resistance: 7.1621, 7.1668, 7.1750

Support: 7.1492, 7.1410, 7.1363

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 7.1410 - 7.1492 but cannot break the support at 7.1492, you may set a TP at approximately 7.1668 and SL at around 7.1363 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 7.1621 - 7.1668, you may set a TP at approximately 7.1750 and SL at around 7.1410 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 7.1621 - 7.1668 but cannot break the resistance at 7.1621, you may set a TP at approximately 7.1410 and SL at around 7.1750 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 7.1410 - 7.1492, you may set a TP at approximately 7.1363 and SL at around 7.1668 or according to your acceptable risk.

Pivot point January 8, 2024 02:15 PM. GMT+7