The decline of USDCNH to 6.80 overnight, triggered a wave of stop orders that led to further deterioration of the pair. At the time of writing, the dollar stands at 6.78 yuans. Thus, the USDCNH lost 14% from the peak levels in June, a huge move for this pair.
From the technical analysis perspective, the double top formation near 7.19 area was confirmed, which shows the potential for a decline to 6.50. However, the next important stop could be 6.70, where the pair spent two and a half months in early 2019.
The data released in the morning showed industrial production recovering to 5.6% YoY, the fastest pace since December, reaching a symbolic plus ( 0.4%) year-to-date compared to the same period last year.
Retail sales in China lagged behind the recovery, losing 9.2% in the first eight months compared to the same period a year earlier. However, here too, the figures were noticeably above expectations, adding 0.5% YoY vs the 0.0% forecasted.
China is the second world economy. Its development through stimulus programmes in 2009 significantly accelerated the recovery of global demand and supported stock and commodity markets. A similar scenario seems to be happening this time. China is recovering rapidly, giving back confidence and increasing global demand, which is spreading positive vibes across all markets.
What remains now is to ensure that Europe and the US do not falter. ZEW’s estimates of business sentiment in Germany are being released later today. By the start of the US session, the US Industrial Production Indexes are set to publish. All of this will make it possible to compare the recovery of the largest economic regions by maintaining or questioning the overall positive trend.