China must support a fragile economy.

The Chinese yuan continues to depreciate amid weak economic data. The manufacturing sector remains in contraction, while the services sector is expanding only slightly. Furthermore, the yuan's depreciation reflects the People's Bank of China's decision to set a lower central rate, indicating that the central bank intends to weaken the yuan further. This decision also draws investors' attention to upcoming economic indicators, particularly next week's inflation figures.

China's retail sales grew by 3.7% year-on-year in May, marking the 16th consecutive month of growth. Sales mainly increased in the food and beverage sectors, and clothing sales rebounded after a slowdown in the previous month. Meanwhile, car sales contracted at a slower rate, indicating a recovery in consumer spending across various industries.

Industrial production in China expanded by 5.6% year-on-year in May, below the market's expectation of 6% and slowing from the 6.7% growth in the previous month. On an industry basis, 33 out of 41 sectors continued to show growth trends. Notably, chemical products, which form the basis of many industries, grew by 12.7%. The automotive, textile, and alcoholic beverage industries also continued to grow.

Foreign direct investment (FDI) in China fell by 28.2% year-on-year to 412.5 billion yuan from January to May, marking the largest decline in the first five months of the year. This is down 12.2% or 50.41 billion yuan from the start of the year. Most investments continued to flow into the high-tech manufacturing sector, with significant contributions from Germany and Singapore, which increased by 24.2% and 16.2%, respectively. In May alone, 52.3 billion yuan were invested domestically.

The yield on China's 10-year government bonds dropped to around 2.18%, the lowest on record, as investors remain skeptical about the domestic economy due to conflicting economic signals from recent PMI data. A private sector survey revealed that China's factory growth reached a three-year high. However, other data released in the past week were not as positive, showing that manufacturing activities contracted for the second consecutive month, while the services sector grew only slightly.

Techical analysis data (5H)

Resistance: 7.271, 7.2715, 7.2722

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 7.2693 - 7.2699 but cannot break the support at 7.2699, you may set a TP at approximately 7.2715 and SL at around 7.2688 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 7.271 - 7.2715, you may set a TP at approximately 7.2722 and SL at around 7.2693 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 7.271 - 7.2715 but cannot break the resistance at 7.271, you may set a TP at approximately 7.2693 and SL at around 7.2722 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 7.2693 - 7.2699, you may set a TP at approximately 7.2688 and SL at around 7.2715 or according to your acceptable risk.

Pivot point July 4, 2024 06:16 PM. GMT+7