China continues to face persistent negative factors. 

The release of the Purchasing Managers' Index (PMI) data in China, which came in lower than expected, indicates increasing economic challenges and heightened tensions. This has resulted in the continuous depreciation of the Chinese yuan for three consecutive months. As a result, some investors are eagerly awaiting signs of intervention from China to try and slow down the depreciation of the yuan after economic figures were announced lower than expected.

Examining the economic figures from the past month, it is evident that China's economic growth has significantly declined since the cancellation of the Zero Covid policy. This has put significant downward pressure on the Chinese yuan, and it is also observed that China's economic surprise index has consistently decreased, reaching negative territory.

In terms of the Communist Party of China, there was an appointment of the Deputy Governor of the People's Bank of China, Pan Gongsheng, as the party's secretary-general last Saturday. This appointment reflects increased expectations for measures to stimulate the economy and prevent a further slowdown, extending beyond the current circumstances.

The People's Bank of China (PBOC) has been reducing interest rates over the past few months to stimulate a sluggish recovery after the impact of COVID-19. Meanwhile, the United States and Europe have raised interest rates to combat rising inflation, resulting in a yield spread between 10-year government bonds of the United States and China exceeding 1.18%. This is the widest margin since May and the lower interest rates in China have also encouraged increased issuance of yuan-denominated bonds.

Additionally, the PBOC revealed the latest survey results from Chinese entrepreneurs and bankers, indicating a more positive outlook on the economy in the second quarter. The entrepreneur macroeconomy heat index, which measures the economic sentiment of entrepreneurs, reached 30.9%, marking a 4.3-point increase compared to the previous year.

The depreciation of the yuan has led to a significant number of foreign companies issuing yuan-denominated bonds in China at historically high rates. This is due to the low interest rates and government incentives to promote the use of yuan globally. Notably, Deutsche Bank's issuance of bonds in China's interbank market reached a total value of around 66.9 trillion yuan ($9.23 trillion) in the past six months, which is considered a remarkably high amount.

Technical analysis data (5H)

Resistance: 7.2473, 7.2515, 7.2600

Support: 7.2346, 7.2261, 7.2219

Source: Investing.com