China lockdowns hit PMI data
Before China left for the long holiday, Caixin released its Manufacturing PMI for April , and the data wasn’t pretty. The headline reading was 46 vs and expectation of 47 and a March reading of 48.1 This was the third month since the beginning of 2022 that the print has been below the 50 level, which is considered the contraction/expansion level. Earlier today, Caixin released the Services PMI for April, and it was even worse. The headline print was 36.2 vs 42.1 expected and 42 in March. This is well below 50 contraction/expansion level. It was also the lowest print since the pandemic began in February 2020. The official China PMI data was similar. This is just more evidence of the slowdown occurring in China as a result of the recent lockdowns and restrictions put into place as a result of the Zero Covid policy.
USD/CNH had been moving lower in an orderly fashion after putting in a high of 7.1987 during the week of May 25th, 2020. After reaching a low in February 2021 near 6.400, the pair began moving sideways outside the channel. The move resolved itself in a year-long descending wedge from May 2021 to April 18th of 2022. The target for the breakout of a descending wedge it a 100% retracement of the pattern. As USD/CNH broke above the top, downward sloping trendline, the pair began moving higher with gusto, reaching the target of the pattern in only 2 weeks! In addition, price moved above the 38.2% Fibonacci retracement level from the highs of May 2020 to the lows of February 2022, near 6.6461. Today price reached its highest level since early November 2020 at 6.6979. Notice on the weekly timeframe that the RSI is in overbought territory, an indication that price maybe ready for a pullback.
Source: Tradingview, Stone X
On a 240-minute timeframe, USD/CNH has formed a flag pattern. The target for a flag pattern is the length of the flagpole added to the breakout point of the flag, which in this case is near 6.9400. However, if price is to get to the target, it must first break through resistance at the top of the flag (and today’s highs) at 6.6979. Above there, resistance is at the 50% retracement level of the above-mentioned timeframe near 6.7511, and then a confluence of resistance at previous lows from January 2020 and the 61.8% Fibonacci retracement level between 6.8456 near 6.8562. First support is at the bottom trendline of the flag pattern near 6.6158, then horizontal support at the top of the descending wedge near 6.5875 (see weekly). Below there, USD/CNH can fall to additional horizontal support at 6.4242 (see weekly).
Source: Tradingview, Stone X
The lockdowns in China have led to weaker manufacturing and services data. Is this just the beginning or is there more to come? As a result, the Yuan has weakened, and USD/CNH has gone aggressively bid. The shorter-term chart shows the pair is consolidating in a flag formation, while the longer-term chart shows an overbought RSI. If price continues to move sideways, watch for the longer-term RSI to unwind, which will allow the pair to move to the flag target near 6.9400!
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.
FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.
FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.
GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2025