China has decided to launch another major economic stimulus.

The yuan has continued to strengthen due to a slight recovery in the Chinese economy during the National Day holiday, indicating a mild improvement in manufacturing activity in September. However, the services sector has slowed down more than expected. Additionally, the Chinese government has implemented key policies to make it easier for people to spend flexibly on real estate, and it is injecting large amounts of money into the economy to stimulate growth as the slowdown continues.

China’s service PMI fell to 50.3 in September, lower than the market forecast of 51.5, marking the slowest expansion in the services sector in a year. Although export businesses grew strongly due to increased foreign demand, domestic demand remained sluggish. Employment grew slightly, but production costs rose due to higher inflation in raw materials, labor, and energy.

The manufacturing PMI dropped to 49.3 in September as new orders fell again. Meanwhile, foreign export sales saw their biggest decline in 13 months due to sluggish economic conditions, leading to a continued slowdown in employment and job announcements. On the cost side, raw material prices continued to decline as companies sought to boost sales amid intensifying competition.

The People’s Bank of China (PBoC) reduced the reserve requirement ratio (RRR) for banks by 50 basis points, marking the second reduction this year. The move aims to stimulate the ongoing economic slowdown and took effect on September 27. Pan Gongsheng, the governor of the PBoC, indicated earlier in the week that the reduction would result in around 1 trillion yuan in new loans, providing businesses with increased financial liquidity. Additionally, the PBoC lowered the 7-day short-term reserve interest rate by 20 basis points to 1.5%. This adjustment is aimed at setting the benchmark loan interest rate to prevent the economy from declining further.

The yield on China’s 10-year government bond rose to 2.21%. According to the latest Purchasing Managers' Index (PMI) report, a private-sector survey revealed that manufacturing slowed more sharply than expected, marking the steepest contraction since 2023. In addition, the services sector also declined in September.

Techical analysis data (5H)

Resistance: 7.0189, 7.0196, 7.0208

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 7.0156 - 7.0169 but cannot break the support at 7.0169, you may set a TP at approximately 7.0196 and SL at around 7.0149 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 7.0189 - 7.0196, you may set a TP at approximately 7.0208 and SL at around 7.0156 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 7.0189 - 7.0196 but cannot break the resistance at 7.0189, you may set a TP at approximately 7.0156 and SL at around 7.0208 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 7.0156 - 7.0169, you may set a TP at approximately 7.0149 and SL at around 7.0196 or according to your acceptable risk.

Pivot point October 2, 2024 08:25 PM. GMT+7