The USD/CNY exchange rate has been in a steep sell-off as China’s fundamentals improved. It crashed to a low of 6.945, the lowest level since September 14. The Chinese yuan has crashed by more than 4.7% from its highest level in November.
Chinese reopening continues
The USD/CNY price remained under pressure as investors focused on the ongoing reopening in China. Following last week’s protests, Beijing has undone some of the country’s zero-Covid strategy.
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In a statement, the State Council said that people should not have a negative test before entering most public places. The new rules also mean that asymptomatic cases should isolate at home instead of in hospitals. These statements came after a meeting of the politburo in which the members committed to stabilise the economy.
Therefore, analysts expect that the Chinese economy will resume its recovery process in the coming months. Recent economic data from China have been relatively weak.
On Wednesday, trade data from China revealed that exports dropped by 8.7% in November, the biggest crash since 2020. Exports fell to $296 billion while imports dropped by 10.6%. As a result, the total trade surplus narrowed to $69.84 billion from the previous $85 billion. Economists were expecting that the surplus would grow to $79 billion.
Therefore, analysts expect that China will work hard to stabilise the economy. According to Bloomberg, officials are considering a new economic growth target for next year. The 5% target will give more powers to local government officials to shift their gear from Covid measures.
The USD/CNY price has also dropped because of the potential measures by the Fed. Analysts expect that the Fed will slow the pace of its rate hikes from 0.75% to 0.50% in December.
The USD to CNY exchange rate has been in a strong downward trend in the past few days. In this period, it has crashed by more than 3.6% from the highest point this month. It also moved below the 25-day and 50-day moving averages and the Ichimoku cloud.
The pair has also dropped below the neckline of the head and shoulders pattern. Therefore, the pair will likely continue falling as sellers target the key support level at 6.800. A move above the resistance level at 7.02 will invalidate the bearish view.
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