USDCNH on the Move Amid Beijing’s Stimulus

October 4, 2024

Key points:

• Yanlord Land surged 57% in a week, while Sunpower Group rose 38%, driven by Beijing’s stimulus aimed at boosting the property and export sectors.
• USDCNH holds a bullish trend, with potential resistance at 7.06468 as traders await key U.S. payroll data and further stimulus effects.

Shares of Chinese companies listed on the Singapore Exchange rallied this week, buoyed by news of a substantial stimulus package from the Chinese government.

According to a report by the Straits Times, this move from Beijing aims to revive the country’s struggling property sector, boost weak exports, and stimulate domestic demand.

While these stocks benefit directly from the stimulus, the broader effect is unfolding in the currency market, where the USD/CNH pair has taken center stage.

For traders looking to capture opportunities related to China’s economic recovery, monitoring the USD/CNH is critical. The forex pair has been moving in a short-term bullish trend, as seen in recent chart patterns.

While the Chinese stimulus aims to strengthen the economy, its immediate impact on the yuan has been limited.

Instead, the U.S. dollar has continued to dominate as global uncertainties, strong U.S. data, and safe-haven demand push the currency higher.

USD/CNH Chart Analysis

Picture: USDCNH continues its bullish momentum near 7.064 resistance, with slowing MACD signals hinting at possible consolidation or pullback, as seen on the VT Markets app.

The USD/CNH is currently testing a key resistance level at 7.06468, as shown on the chart below. The pair has held a bullish trajectory, supported by strong U.S. economic performance.

However, the MACD shows early signs of slowing momentum, with recent histogram declines pointing to a potential consolidation phase.

The support level is around 7.050, where traders should watch for any breakdowns.

A breakout above 7.06468 could open the door for further gains in the dollar, while a pullback could signal a temporary correction.

What to Watch Next

• U.S. Non-farm Payroll Data: The U.S. non-farm payroll report, due shortly, will have a major impact on the direction of USDCNH. Strong jobs data could boost the U.S. dollar, reducing any short-term support for the yuan and pushing the pair higher.
• Fed Rate Decisions: Traders are also closely monitoring upcoming Federal Reserve decisions. A less aggressive rate cut or even a pause could lead to further strength in the dollar, prolonging the bullish momentum in USD/CNH.

Uncertainties and Global Interplay

Rising tensions in the Middle East have implications for USDCNH. The U.S. dollar has traditionally served as a safe haven during periods of global uncertainty, further supporting its strength against the yuan.

Traders should keep an eye on developments in U.S. foreign policy and its economic outlook, as they will influence the pair’s movement.

While Beijing’s stimulus package is designed to support economic recovery, the timing and effectiveness of its impact remain uncertain.

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If Chinese domestic demand and exports pick up, the yuan could gain strength, potentially reversing the upward trend in USDCNH.

Until then, traders should stay cautious and be prepared for both upside and downside moves in the pair.

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