Is that the beginning? 

Chinese inflation marked the fastest increase since July 2018 

By: Ahura chalki

Market analyst – IFC Markets

One of the essential pieces of data of the week, which has been published by now, and we are now waiting for that from the U.S.A., is the C.P.I. and PPI data.

Earlier this week, published data from Turkey, Russia, and Mexico all were more than expected, mainly on a Yearly basis, confirming that most economies are on the track of recoveries.

Earlier today, Consumer and producer price inflation in China rose respectively to 0.4% and 4.4% from -0.2% and 1.7% of last month’s published data. In China, and especially for PPI, mostly we can say it is because of a sharp increase in Oil price from less than $20 to more than $55. Massive Chinese government economic supports also were another reason for that.

Later today, the market also expecting for 0.2% and 0.5% increase in American C.P.I. and PPI. Earlier this week, Federal Reserve has said it expects to ‘look through’ what it expects to be a temporary period of higher-than-usual inflation rates, focusing instead on the pace of repair in the labor market.

 

USD/CNH – U.S. Dollar Chinese Yuan 

On Thursday, the People’s Bank of China (PBOC) set the USD/CNY central rate at 6.5463 versus Wednesday’s fix and close of 6.5384. Currently, it is trading at 6.5634, above 20 & 50 D.M.A., O.B.V. trend line, and 60 points in the R.S.I. indicator, all supporting the current up-trend. The current pairing rate is 6.8% lower than a year ago on 7.0500 when USD was more in demand based on its Safe-Haven position. Since we are still expecting more downtrend for USD, as inflation is expected to run forward how F.E.D. is expecting, fundamentally, the uptrend is not supporting pairing. This is what we can see in the H4 chart as well, where the price mostly moves between and lower than 20 & 50 M.A. In the short term, R2 on 6.60 can be a crucial level to confirm more uptrend; however, breaching under P.P. at 6.55 and then S2 at 6.53 can open the doors for more profound prices. However, we expect to have the movement between S2 and R2 in the midterm. 


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