China continues to face a contracting economy.

The yuan weakened last week due to continuous pressure on the currency in China, leading investors to anticipate that the People's Bank of China would start implementing easing monetary policies to support the currently declining economy. Analysts also suggest that China is inclined to maintain the stability of its currency to prevent market volatility and to support businesses related to imports for more consistent pricing.

China's inflation rate decreased by 0.8% year-on-year in January, marking the fourth consecutive month of decline. This was driven by a rapid decrease in food prices by 5.9%, while clothing costs continued to rise steadily due to the winter season. Additionally, the decreased transportation costs led to a reduction in the overall costs of various goods.

The Service Purchasing Managers' Index (PMI) in China dropped to 52.7 in January, reflecting a decrease in new orders following a continuous expansion of service activities for 13 consecutive months. This indicates the resilience of the service sector, supported by strong domestic demand and an increasing customer base, leading to increased hiring for the second consecutive month. In terms of product costs, raw material prices slightly increased but remained lower than the average due to higher raw material, labor, and transportation costs.

The Manufacturing PMI increased to 50.8, higher than the market expectation of 50.6, marking the third consecutive month of factory activity growth. Overseas sales increased for the first time in seven months, along with an improvement in supply chain management. However, new orders saw a decrease, and companies continued to reduce their workforce, although the trend of workforce reduction was decreasing. Raw material costs increased slightly, contrasting with decreased selling prices due to efforts to retain customers amidst intense competition.

Foreign Direct Investment (FDI) in China decreased by 8% year-on-year, amounting to 1.13 trillion yuan or $157.1 billion. This signals that foreign investors have not fully returned to China. While there was a decrease in foreign investment in manufacturing by 1.8%, there was an increase in investment in high-tech manufacturing by 6.5%, particularly in medical equipment by 32.1% and in electronic equipment by 12.2%, with a significant increase from France and the United Kingdom by more than 80%.

China's foreign exchange reserves decreased to $3.219 trillion in January, down from $3.238 trillion in December, mainly due to the strengthening of the dollar against other major currencies, resulting in a decrease in asset value when converted into dollars. However, China's gold reserves increased slightly to 72.19 million troy ounces compared to the previous month.

Techical analysis data (5H)

Resistance: 7.1988, 7.1993, 7.2001

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 7.1967 - 7.1974 but cannot break the support at 7.1974, you may set a TP at approximately 7.1993 and SL at around 7.1961 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 7.1988 - 7.1993, you may set a TP at approximately 7.2001 and SL at around 7.1967 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 7.1988 - 7.1993 but cannot break the resistance at 7.1988, you may set a TP at approximately 7.1967 and SL at around 7.2001 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 7.1967 - 7.1974, you may set a TP at approximately 7.1961 and SL at around 7.1993 or according to your acceptable risk.

Pivot point February 19, 2024 08:38 PM. GMT+7