USD/CNH and USD/CNY Forecast: Assessing China’s Economic Recovery

The USD/CNH exchange rate has seen an upward drift due to weaker-than-expected economic data from China. This has taken the rate to 6.978, close to its highest point since March. Similarly, the USD/CNY rate has increased to 6.96. Both onshore CNY and offshore CNH have jumped more than 2% from their lowest point in March. This suggests a faltering Chinese economy.

Earlier in the year, the Chinese economy was predicted to grow at a fast pace, but the actual rate has been slower than expected. Fixed asset investments jumped by 4.7% in April, lower than the expected 5.5%, and industrial production rose by 5.6%, lower than the anticipated 10.9%. Retail sales also failed to rebound as quickly as analysts had predicted, despite rising 18.4% from a year earlier and 8.46% from March.

China’s unemployment rate remains high, at 5.3%, despite slipping from 5.3% in April. As such, it is likely that China will grow at a slower pace than the planned 5% this year. There are several risks to the Chinese economy, including a struggling property sector and strong competition in the manufacturing sector. Data released last week also revealed that China’s consumer and producer inflation had tumbled to a two-year low.

The USD to CNH exchange rate reached 6.967 on Tuesday, rising above the key resistance point at 6.9650, which was the upper side of the cup and handle pattern, indicating a bullish sign. The pair has also moved above the 25-day and 50-day exponential moving averages (EMA). As such, there is a high likelihood that the USD/CNH price will continue to rise, with buyers targeting the key resistance point at 7.000. This will likely lead to an increase in the USD/CNY pair as well due to their close correlation.

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