China is facing challenges from a fragile economy.

Currently, China's economy is still facing challenges, including trade tensions with the United States and Europe, as well as less favorable economic growth compared to the past. The recent economic recovery in China during the past two quarters hasn't been very strong, and there are additional projections that the Chinese economy might slow down further in the third quarter. This is supported by data such as a significant decrease in new credit, which indicates a weakening trend.

Data from Tuesday shows that retail sales in the United States increased by 3.17%, which is higher than anticipated in July. This rapid increase carries the risk of pushing up the Fed's interest rates again, which in turn could lead to an appreciation of the yuan. However, the robust retail sales also give the Federal Reserve more room to raise interest rates. If interest rates are increased again, the yuan will likely weaken further. China itself might have to lower interest rates again if the economic indicators continue to remain poor, which would also impact the value of the yuan.

China's unemployment rate has been continuously rising, reaching 5.3% in July from the previous month's 5.2%. The latest data also indicates a persistent increase in unemployment among youth aged 16 to 24, reaching a new peak of 21.3%. The Chinese government has set a target unemployment rate of around 5.5% for the year 2027, with the goal of creating approximately 12 million new jobs.

Currently, it can be said that the real estate sector remains the most vulnerable part of China's economy. It has been impacted by previous interest rate hikes and continues to experience sustained contraction, as reported by Chinese media. Country Garden, one of the largest real estate developers in the country, is facing a major debt default situation, which is a dire situation for the real estate market.

The yield on China's 10-year government bonds has dropped to a 51-week low at 2.621% due to the weak economic data in the country. Investors are anticipating further policy easing in response. Additionally, the latest data shows a 14.5% year-on-year decrease in China's exports in July, while imports contracted by 12.4%. This is the highest contraction rate since February 2020, driven by both external and domestic factors. As a result, China has announced plans to implement policy support to stimulate the sluggish economy, but the lack of concrete plans and substantial measures has disappointed the market regarding the announced monetary policies.

Techical analysis data (5H)

Resistance: 7.2920, 7.3016, 7.3202

Support: 7.2638, 7.2452, 7.2356

Source: Investing.com