Yuan investors might be seeing upside of China crackdown
Curiously, FX traders seem to be lining up to sell USD/CNH, despite recent China data misses and intensifying state intervention in key economic sectors . The obvious signs of slowing growth might, counterintuitively, be fuelling their convictions.
Dismal data validates analysts’ calls for further monetary easing by the People’s Bank of China – increasingly a consensus view .
The broadening scrutiny by Chinese regulators into various industries, as part of President Xi Jinping’s push for “common prosperity”, has not fazed yuan bulls; paradoxically giving them more confidence that stimulus is coming.
While policymakers try to whittle the clout of economic giants, they might extend a helping hand to smaller firms – which are suffering, based on Wednesday’s Caixin factory PMI data .
China economic views notwithstanding, the USD may stay in the doldrums since the market appears to have priced in the possibility of the Federal Reserve tapering its bond purchases by year-end. That acceptance has allowed risk appetite to return, buoying Treasury yields and U.S. stocks while denting the haven dollar.
Expect to find plenty of offers in USD/CNH toward the ceiling of the daily Bollinger downtrend channel at 6.4645, and for downward momentum to increase if it closes below the Ichimoku cloud base and 50% retracement of the May-July rally at 6.4407.
Source: Reuters (Reporting by Ewen Chew; Editing by Sonali Desai)