Yuan is off recent lows, but concern about a continued slowdown has caused the People’s Bank of China (PBOC) to weaken the reference rate. The currency has sank significantly against the greenback as growth expansion concerns linger. “The yuan is under pressure to weaken amid concern about the Chinese growth,” said Tsutomu Soma, fixed-income at Rakuten Securities.
Data points from key sectors are on the decline, as some blame the recent Lunar New Year. However, market participants may need to simply accumulate themselves to a lower standard growth. According to the National Bureau of Statistics, housing prices in first-tier cities increased 7.4 percent during the last quarter versus a 7.7 percent gain to cap 2013. Last week also showed that China’s gross domestic product fell to 7.4 percent, which was inline with economist expectations. However, it was three-tenths lower than 2013’s growth expansion.
Price action on the USDCNH has pulled back from recent highs and closed last week at 6.22120. Resistance on the daily chart resides at 6.23012, while support will likely be seen at 6.21150 before seeking a test of 6.2000.
The HSBC flash manufacturing PMI data will be out on Tuesday. Economists are looking for a slight tick higher to 48.4 from 48. Unfortunately, economists have not been able to forecast the accurate index provided by HSBC Holdings and Markit Economics. The prized manufacturing sector has been under 50 since January’s data, signaling contraction. Economists have been too optimistic to the upside and not too pessimistic to the downside since last November.
Expect the flash PMI to show a slight tick downwards to 47.9.