Jul 10, 2024

Last week, we saw gains in the Chinese yuan against the US dollar, and the price is looking to confirm a bottom.

CNHUSD-–-Weekly-ChartCNHUSD – Weekly Chart 

The CNHUSD exchange rate bounced at the 0.1364 level and has resistance close by at 0.1375 for a more significant push higher. 

China’s inflation rate will be released at 9:30 a.m. HKT, and is expected to be 0.4%, up from 0.3% last week. 

China is on the brink of a significant policy meeting with the third plenum next week. This forum, known for unveiling long-term political and economic reforms, is a crucial event for the market. While major initiatives may not be on the agenda this time, the market is still likely to see some movement, particularly in commodity markets. 

“We are watching and waiting to see what gets delivered in the property, infrastructure and manufacturing sectors,” said Paul Bloxham, chief commodities economist at HSBC. Citigroup expects the plenum to provide further support for investment in the grid and clean energy, and extra help for the property market. China’s demand for oil will also be an essential issue. 

China’s inflation data will be released during the two-day testimony at Congress by the US Federal Reserve Chair Jerome Powell. Powell’s recent statement that rate cuts are not imminent in the US has already impacted the market, and his further remarks are likely to shape market sentiment.

“The Fed has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%,” Powell said. 

“The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2%,” he added. 

Investors may still be ahead of the game, thinking there will be a cut in September. China’s plenum next week will likely be a vital driver of the USDCNH around these support and resistance levels.

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