China NBS PMI Manufacturing dropped to 49.3 in October, down from 49.8 and missed expectation of 49.8. It’s the sixth straight month of contraction reading. Looking at some details, new export orders dropped for the 17th month to 47.0, down from 48.2. Employment improved slightly but remain deep in contraction at 47.3, up fro 47.0. NBS PMI Non-Manufacturing dropped to 52.8, down from 53.7 and missed expectation of 53.7. It’s also the lowest reading since February 2016.

The overall set of data suggests that while China’s growth is already at lowest pace in 30 years, there is not sign of a turn around yet. The improvements seen back in the end of Q3 were just ripples in a down trend, rather than the start of sustained recovery. The official PMIs will likely remain sluggish in the coming months while a Phase 1 US-China trade deal is unlikely to provide any immediate lift.

USD/CNH drops notably today, mainly thanks to weakness in Dollar. Rejection by 55 day EMA suggests more downside for the near term. But overall, USD/CNH is seen as in consolidation pattern from 7.1955. Hence, we’d expect strong support from 6.9909 cluster, 38.2% retracement of 6.6704 to 7.1955 at 6.9949, to contain downside to bring rebound.

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