USD/CNH, AUD/USD: Spluttering services sector activity in China is hardly new news
With policymakers continuing to rollout stimulus measures, it’s questionable whether the USD/CNH pop will last.
Share this:
China’s services sector continues to slow, generating renewed downside pressure on the offshore Chinese yuan and Australian dollar against the US dollar. But with the data merely confirming what many already knew, and with policymakers continuing to rollout fresh stimulus measures, it’s questionable whether the selling will last.
Caixin Services PMI hits CNH, AUD hard
The Caixin China general services PMI fell to 51.8 In August from 54.1 a month earlier, hitting the lowest level this year. While above 50 indicating an expansion in activity levels, the slowdown adds to evidence that weakness in China’s manufacturing sector is now spreading to larger parts of the economy. Within the report, new orders declined for the first time this year while input price inflation eased by the most in six months.
All very gloomy but hardly different to the message contained in the government’s own services PMI released last week. It’s not only known information but explains why Chinese policymakers are actively moving to stimulate domestic demand already, pointing to the potential for the initial market reaction to fade.
Source: Trading View
USD/CNH broke the downtrend that’s been in place on the 4-hourly chart following the PMI release but has since pulled back. A failure to sustain the break may see a pullback towards minor support at 7.2700. Below that, long-standing uptrend support is located around 7.2500.
As mentioned previously, the catalyst for the move was largely identical to information received last week and we’ve seen a lot of new positive news flow since then.
-- Written by David Scutt
Follow David on Twitter @scutty
How to trade with City Index
You can trade with City Index by following these four easy steps:
- Open an account, or log in if you’re already a customer
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
- Search for the market you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
USD/MXN Analysis: Is Super Peso Starting to Fade?
Over recent trading sessions, the Mexican peso has continued to show signs of weakness against the U.S. dollar. This can already be seen in USD/MXN, which has gained more than 1.7% over the last three sessions, highlighting sustained buying pressure in favor of the dollar in the short term.
AUD/USD hammered by US yields and fading RBA hike bets
US yields, dollar strength and fading RBA hike bets have combined to drive AUD/USD to fresh multi-month lows. The macro and technical bias remains bearish, although history suggests parts of the move are now reaching unusually stretched levels.
The RBA Hiked Rates and the Australian Dollar Still Fell
AUD/USD fell after the RBA rate hike because the central bank's hawkish stance was already priced in while the U.S. dollar stayed firm.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.