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China industrial production grew again, but retail sales contracts, USD/CNH range bound

China’s industrial production grew 3.9% yoy in April, above expectation of 1.5% yoy. That’s the first expansion reading this year as activity was returning to normal from coronavirus pandemic. However, consumption remained weak as retail sales contracted -7.5% yoy in April, matched expectations. That’s already better than -15.8% contraction of sales in March. Fixed asset investment contracted -10.3% ytd yoy in April, worse than expectation of -10.0%.

USD/CNH remains bounded in range after the releases, having little reactions. Outlook is unchanged that the structure of the rebound from 6.8452 suggests that it’s the second leg of the corrective pattern from 7.1953. Hence, we’d expect upside to be limited by this 7.1953 resistance to bring another fall. Break of 7.0523 would start the third leg towards 6.8452/9040 support zone.

Overall, we’d expect range trading to continue between 38.2% retracement of 6.2354 to 7.1953 at 6.8286 and 7.1953. Breakout on either side will need some significant development to fuel.

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