Chinese business still shows potential for growth.

The Chinese yuan has strengthened to 7.11 yuan per US dollar after a decline following the latest Chinese PMI data. A private sector survey indicated that China's service sector is experiencing a slowdown in growth, putting pressure on the labor market and the country's economic growth. However, a slight increase in the manufacturing sector's growth has led to a more positive outlook among investors. There are still concerns about long-term development due to restrictions on certain essential goods needed for advancing key technologies.

China's industrial companies saw profits grow by 3.6% year-on-year, reaching 4,099.17 billion yuan in the first seven months of 2024. This growth is attributed to continuous government support, which has helped companies recover more effectively, as domestic demand remains relatively stable. The increase in profits mainly comes from the metal smelting industry, followed by electronic equipment. However, some industries, such as coal mining, petroleum, and other fuels, have seen a decline in profits.

The manufacturing PMI rose to 50.4 in August, up from 49.8 in July, surpassing market expectations of 50.0. This increase is due to a resurgence in new orders, prompting an expansion in production capacity to meet rising domestic demand. However, foreign demand declined for the first time in a year amid escalating geopolitical tensions, leading to a slight lengthening in delivery times. Meanwhile, production costs decreased slightly due to lower raw material prices.

China's services PMI dropped to 51.6 in August from 52.1 in the previous month, below the market forecast of 52.2. This decline was due to a slowdown in new order growth, while employment saw a slight decrease. Despite the decline, the services sector has expanded for 20 consecutive months, driven mainly by the rapid growth of emerging businesses. Faster-growing foreign demand remains a key factor in the growth of the services sector. Employment fell again after rising in July due to resignations and some layoffs aimed at cost reduction.

The yield on China's 10-year government bonds fell to 2.15% following the release of the PMI data. Most investors still believe that China's economy can continue to expand, even if the growth rate is slowing. Ongoing government support may help sustain the economy to some extent.

Techical analysis data (5H)

Resistance: 7.1199, 7.1227, 7.1279

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 7.1067 - 7.1118 but cannot break the support at 7.1118, you may set a TP at approximately 7.1227 and SL at around 7.1038 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 7.1199 - 7.1227, you may set a TP at approximately 7.1279 and SL at around 7.1067 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 7.1199 - 7.1227 but cannot break the resistance at 7.1199, you may set a TP at approximately 7.1067 and SL at around 7.1279 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 7.1067 - 7.1118, you may set a TP at approximately 7.1038 and SL at around 7.1227 or according to your acceptable risk.

Pivot point September 4, 2024 08:04 PM. GMT+7