The Chinese economy has not fully recovered yet. 

The Chinese Yuan continues to face sustained pressure, both from the widening yield differentials compared to the United States and the 0% exchange rate. The economic recovery signals remain uncertain, even though the Yuan has strengthened slightly in recent months. However, this strengthening is partly due to the weakening of the US Dollar, which resulted from lower inflation rates and reduced expectations of Federal Reserve interest rate hikes.

The Chinese central bank has announced that it will maintain its interest rate policy at 3.55%, following a 10 basis points reduction last month. This decision is aimed at stimulating the domestic economy, as another factor is the advantage of having a weaker currency, which can boost economic growth. Moreover, China has consistently intervened in the foreign exchange market to ensure stability and a more favorable outlook for the Yuan.

Huang Chunying, the spokeswoman of the State Administration of Foreign Exchange (SAFE), expressed optimism about the future, stating that "in the near future, the exchange rate of the Yuan will return to a reasonable and balanced level. We will continue to follow policies that focus on maintaining the stability of the currency and implement necessary measures according to the actual situation to improve the market environment and restore market expectations."

In this instance, China's central banks have continued their intervention in the Yuan's value, and major state-owned banks in China have been selling US Dollars to buy Yuan in both onshore and offshore spot markets. This selling of US Dollars came after high-level Chinese officials stated their intention to increase support for economic policies due to the incomplete recovery from the COVID-19 pandemic. The focus of this stimulus is aimed at boosting domestic demand and sending additional signals for economic stimulation.

Due to the Chinese economy not fully recovering, the profits of industrial companies in China have decreased by 16.8% from the previous year to 3,388.46 billion Yuan in the first two quarters of the year 2566 (2023). The decline in profits is attributed to the weakened demand and the persistent pressure on profitability. Out of the 41 surveyed industries, 29 of them have encountered revenue difficulties. In June alone, the industrial sector's profits declined by as much as 8.3%.

Techical analysis data (5H)

Resistance: 7.1484, 7.1651, 7.1789

Support: 7.1179, 7.1041, 7.0874

Source: Investing.com