China has begun to signal full-scale economic support.

The yuan has weakened to around 7.20 yuan per US dollar due to the strengthening of the dollar from expectations of an interest rate cut earlier this year. Strong US job reports have boosted support for the dollar. Economic data from China shows that service activities are expanding. Furthermore, investors expect China to further relax monetary policy soon.

The People's Bank of China (PBoC) kept interest rates unchanged in January as the central bank continues to support ongoing economic recovery efforts. The one-year loan prime rate (LPR) for corporate and household loans remains at 3.45% for the fifth consecutive month. The five-year LPR used as a reference for mortgages is at 4.2% for the seventh straight month. GDP growth exceeding central bank expectations indicates some results from state support.

The People's Bank of China expanded new loans to 1.17 trillion yuan in December, up from 1.09 trillion yuan in November, as the central bank continues policies to support the economy. The new loan release of the central bank hit a record high of 22.75 trillion yuan, up 6.8% from 21.31 trillion yuan in 2023. The central bank may trend towards increasing system flexibility and consider interest rate cuts in the coming months.

Additionally, the People's Bank of China announced a 50-basis-point reduction in the reserve requirement ratio (RRR) for all banks to 10%, effective from February 5. Analysts expect a release of up to 1 trillion yuan (139.45 billion US dollars) into the market to stimulate economic recovery and increase money circulation, which will benefit small businesses.

China's 10-year government bond yields fell to a 22-year low of less than 2.5% as investors expect China to further relax policies to support the contracting economy and liquidity problems. Expectations are for interest rate cuts this year. Furthermore, reducing bank reserve ratios is expected to provide long-term capital support to the economy of around 1 trillion yuan. Additionally, there are reports that policymakers are attempting to allocate approximately 2 trillion yuan to establish an additional fund.

Techical analysis data (5H)

Resistance: 7.1983, 7.1996, 7.2017

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 7.1928 - 7.1949 but cannot break the support at 7.1949, you may set a TP at approximately 7.1996 and SL at around 7.1915 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 7.1983 - 7.1996, you may set a TP at approximately 7.2017 and SL at around 7.1928 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 7.1983 - 7.1996 but cannot break the resistance at 7.1983, you may set a TP at approximately 7.1928 and SL at around 7.2017 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 7.1928 - 7.1949, you may set a TP at approximately 7.1915 and SL at around 7.1996 or according to your acceptable risk.

Pivot point February 5, 2024 03:03 PM. GMT+7