China's inflation rate turns negative.

The Chinese yuan appreciated only slightly after the U.S. dollar weakened in the previous period, as investors grew increasingly concerned about a potential U.S. economic recession driven by rapidly rising import tariffs. Further uncertainty arose after former U.S. President Donald Trump hinted at another transition period for the U.S. economy. Meanwhile, China's government is planning to implement additional economic stimulus measures, raising its fiscal deficit target to 4%. Investors also anticipate that the People's Bank of China (PBOC) will cut interest rates soon, following the return of deflation.

China's trade surplus surged to $170.52 billion in the first two months of the year, up from $125.16 billion in the same period last year. This rapid increase was largely due to a significant decline in imports, which dropped by 8.4%, bringing total imports down to $369.4 billion. The decline in domestic demand and the impact of higher U.S. tariffs led many businesses to postpone imports while awaiting clearer U.S. trade policies.

Exports grew by 2.3% year-over-year, reaching $540 billion—lower than market expectations of 5.0% and significantly slowing from the 10.7% surge seen in December. This slowdown reflects escalating trade tensions with the U.S. and weaker activity during the Lunar New Year holidays. Additionally, export growth was modest, with key exports remaining agricultural products, fertilizers, machinery, and electronics. Exports to the U.S. increased by only 2.3%.

China's inflation rate fell by 0.7% year-over-year in February, marking the first deflationary period since 2024 amid weaker demand following the late-January Lunar New Year holiday. Food prices saw the sharpest decline in 13 months, dropping by 3.3%, with fresh vegetable and pork prices falling rapidly. Meanwhile, non-food prices declined slightly by 0.1%. Core inflation, which excludes volatile food and energy prices, also fell by 0.1% in February, signaling renewed deflationary pressures and reinforcing expectations that the Chinese government will introduce further stimulus measures.

China's manufacturing PMI rose to 50.8 in February, exceeding market expectations of 50.3 and reaching its highest level since last November. Both output and new orders grew at their fastest pace in three months, driven by improved market conditions that stimulated some demand. Foreign sales also increased after two consecutive months of decline. Companies have stepped up their purchasing activity, though not enough to fully meet production demands. However, employment continued to contract, reflecting hiring slowdowns amid rising production costs.

China plans to inject at least 400 billion yuan in the coming months as part of its stimulus efforts to revive the sluggish economy. Most of this funding will be directed toward fundamental banks, such as the Agricultural Bank of China, given the significant role of major Chinese banks in executing the government's economic and financial policies. These banks play a crucial role in supporting struggling borrowers and maintaining financial stability.

Techical analysis data (5H)

Resistance: 7.2341, 7.2384, 7.2418

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 7.223 - 7.2264 but cannot break the support at 7.2264, you may set a TP at approximately 7.2384 and SL at around 7.2187 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 7.2341 - 7.2384, you may set a TP at approximately 7.2418 and SL at around 7.223 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 7.2341 - 7.2384 but cannot break the resistance at 7.2341, you may set a TP at approximately 7.223 and SL at around 7.2418 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 7.223 - 7.2264, you may set a TP at approximately 7.2187 and SL at around 7.2384 or according to your acceptable risk.

Pivot point March 11, 2025 09:22 PM. GMT+7