USD/CNH: China cuts rates as more data show a weakening economy

Summary:

• Chinese Yuan falls as economic indicators reveal further slowdown.
• Industrial output growth slower than June and below expectations.
• Mobile sales also underperform expectations.
• Unemployment rate rises to 5.3%, posing challenges for Chinese economy.
• People's Bank of China cuts one year loan rate and considers stamp duty reduction.
• US dollar strengthens against offshore Chinese yuan.
• Technical analysis suggests potential trends in the foreign exchange market.

The Chinese Yuan is on the way down again today, falling as an array of economic indicators across the Chinese economy released today show the world's second largest economy has slowed further.

Let's take a look at the evidence that we've seen. Industrial output, it did rise 3.7% in any other economy. This would look good. But this is from this time last year, a slower rate than the 4.4% in June and below expectations of a 4.4% increase. Mobile sales, yep, again, still looking pretty good so far as other economies are concerned, but way short of expectations at 2.5%. 3.1% increase we saw in June, analysts forecast of a growth of 4.5%. Also unemployment rate rising one notch to 5.3%. And the problems the Chinese economy has gone, while the Chinese authorities, is the fact that this is useful employment most notably. And that is the part of the economy, part of the social structure, which is most mobile, which are most vocal and which have been finding the going most tough. Less than an hour before the release of the batch of July data coming through in the Chinese economy, the PBOC, the People's Bank of China, cut its one year loan rate for the second time in three months, this time by 15 basis points, the 2.5%. It also announced a few minutes ago, China Mulling cutting stamp duty to revive the stock market. Let's take a look at what's happening on the foreign exchange market.

This is the US dollar rising against the offshore Chinese yuan, which we trade on the IG platform. Last week I drew this Andrews Pitchfork on here, which I felt was interesting because if you look at the lows that we had back on the 14th of July, which is where the Pitchfork handle starts, that was then broken, as indeed it always gets done in an upward moving trajectory by the lows that we had back on the 27th of July, hitting levels there not seen since the 60th of June. Since then, we've seen the bottom line of this Pitchfork perspective. We're now into the second band here, which gives me confidence. We've got a break here as well of the line of resistance on the 30th of June. We're now there at levels not seen since the 4th of November. If you're long on this, your stock retains underneath the rising line of support down here.

So you'll stop at about the 723 level. You could be a little bit more aggressive in your stock potentially to go up underneath this green dotted line here, which would be under today's cash, which might be a little bit too close. But nonetheless, this trend is in place. And because we've seen recent highs not seen since the 4th of November there, I'm relatively confident that this continues to be a trend to watch out for. It was a trade in the trend I caught up on last week, and it is now making money on the markets. It's not a trade recommendation. It's just an observation of what's happening and how you would structure a trade if you were to go long on this market.

If you have been long so far, keep that stop loss coming up underneath the session, underneath the session lows to try and help you keep the profits locked in on this long trade on the dollar against the U.S.