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Asset Watch
Tuesday, 24 September 2024
The People’s Bank of China has further eased its policy by reducing rates by 20 basis points, alongside property market measures aimed at stimulating economic growth. This follows the US Federal Reserve’s 50 basis point rate cut, which strengthened the Chinese yuan against the US dollar.
Chinese policymakers also unveiled a package to support the property sector, including relaxed rules for second home purchases and liquidity support amounting to hundreds of billions of yuan. Markets anticipate additional measures to boost consumer demand.
Investors responded positively to the Chinese package, recognising the government’s efforts to stimulate the economy, which has slowed to its lowest growth rate in five years.
Chart Source: ADSS Platform
On July 24, the USD/CNH pair closed below the 50 simple moving average and started a downward tend creating lower highs with lower lows. This bearish momentum led the price to print its lowest levels since May last year.
Right now, the price moves in the trading zone spanning between 7.0401 with 7.1654. A daily close below the low end of the zone, suggests a stronger bearish sentiment and could encourage traders to press towards 6.9577. In this scenario, the support level located at 6.9806 should be considered.
It is worth noting the bullish divergence between the price and the Relative Strength Index (RSI) as the former creates a low with a lower low while the latter creates a low with a higher low , indicating a possible reversal of the bearish trend. Additionally, a daily close above the low end of the mentioned above trading zone reflects a weaker bearish momentum and could send the price to revisit the high end of the zone. That said, the resistance level residing at 7.1400 should be kept in focus.
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