The renminbi has bounced back against the US dollar as the DXY index pulled back and as signs of China’s recovery continued. The USD/CNY exchange rate was trading at 7.15, much lower than the year-to-date high of 7.3490.
Iron ore price is surgingThere are signs that the Chinese economy is doing well even as key challenges remain. The most recent data showed that the country’s industrial production and retail sales continued recovering in November.
Many analysts don’t trust data from China’s statistics agencies. Most recently, Beijing ordered key economists to avoid being too negative about the economy. And according to CNN, some analysts have started disappearing from social media.
Therefore, traders and economists tend to focus on other indirect metrics when predicting the pace of China’s economic growth. One of the best approaches is to look at the prices of key commodities like iron ore and copper.
Iron ore prices continued surging this week, reaching a high of $140, its highest point since June 2022. It bottomed at less than $100 earlier this year. Iron ore is an important commodity that is used in the building and construction industries.
The ongoing iron ore price rally coincides with Beijing’s plans to save the tumbling real estate sector. Beijing has launched a $127 billion plan to boost urban revitalization while the central bank has slashed rates several times to boost spending.
Iron ore is not the only China-focused industrial metal to bounce back recently. Copper has also risen to over $3.95, its highest point since August 4th of this year. It has jumped by almost 12% from the lowest point this year.
The USD/CNY pair has also pulled back as the US dollar index (DXY) continued falling. The index, which tracks the greenback against a basket of currencies, dropped to $101.7 from the YTD high of $107.4.
USD/CNY technical analysis
The USD to CNY exchange rate has been in a downtrend in the past few weeks. In this period, the pair has retreated below the 200-day Exponential Moving Average (EMA). It is also slightly above the lower side of the Andrews Pitchfork tool. The pair has also moved above the key support at 7.1176, the lowest point in July,
Therefore, the outlook for the pair is bearish, with the next point to watch being at 7.096, its lowest point last week. A break below that level will see it drop to the psychological level at 7.00.
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