{x} | Trading.live

Fundamentals

In the Asian session on Wednesday (August 2nd), the USDCNH mid-price was quoted near 7.1368, down 85 basis points from the previous value. Yesterday, the solid data from the U.S. manufacturing and construction sectors overshadowed the impact of job vacancies that fell to the lowest level in more than two years. Besides, the weak economic outlook for the Eurozone and cooling expectations for ECB interest rate hikes suppress the euro and boost the USD, with the USDX closing 0.33% higher at 102.21, and non-U.S. currencies depreciating in general, with the USDCNH closing up 0.54% at 7.1832. In the medium and long term, the USD interest rate hike is ending soon, while the economic data show weak results. Instead, the latest Chinese economic data indicates that China's economy starts to stabilize, the Political Bureau of the Communist Party of China (CPC) Central Committee emphasized the stability of the exchange rate, and the mid-price also shows that China's regulation is maintaining the exchange rate. As all favorable policies accumulate, China's economy is expected to accelerate for a rebound, with the dividend demand for foreign exchange purchases released, the subsequent supply and demand will be balanced, suggesting limited space for CNH depreciation.

Data: U.S. June JOLTS reported job vacancies of 9,582,000 people, a record low since April 2021. With the U.S. June JOLTS job vacancies hitting a more than two-year low, the labor market conditions have weakened. Moreover, the Markit U.S. Manufacturing PMI final value came in at 49 in July, in line with expectations. The initial value of the latest ISM report continues to confirm that the U.S. manufacturing sector is in trouble.

Today's focus: U.S. ADP Employment Change for July.

Technical Analysis

Regarding the daily chart, the CNH has exhibited a clear descending pattern. Now, since the two resistances at the upper area of the triangle channel were effective, it could support USDCNH this time. Furthermore, MACD forms a golden cross near the 0-axis but shows a possibility to turn around. The SMAs are getting closer and fail to display a clear trend shortly. Nonetheless, the bearish trend continues in the middle term and the long term, it is better to move the support below to the 5-day SMA (7.1650) and the resistance above to 7.20.

Today's trading plan: Selling at highs. When USDCNH surges to 7.1950, investors could go short with small positions and set the stop-loss at 7.2050. Meanwhile, the first target will be the 5-day and the 10-day SMAs (7.1650) where investors should take profits partially. Then, move the stop-loss to breakeven for the remaining positions, and set the second target to 7.1350, which is the lower support for the triangle area.

Trading Recommendations

Trading direction: Short

Entry price: 7.1950

Target price: 7.1350

Stop loss: 7.2050

Support: 7.1650/7.1350

Resistance: 7.2000/7.2380