Industrial container freight port in Shanghai, China. Image source: Zhao Jiankang © 123RF.com
Early on Tuesday morning, China’s General Administration of Customs (CGAC) released the world’s second-biggest economy’s Balance of Trade data for March, which beat the initial expectations but fell short of last year's performance for the same period.
China’s trade surplus for last month came in at USD 19.9 billion, which is comparatively smaller than the recorded BT of USD 31.5 billion for March 2019.
Nevertheless, the observed performance surpassed the consensus forecasts of USD 18.5 billion, which were projecting the hit on Chinese trade from the coronavirus fallout to have more considerable.
China Balance of Trade. Image source: TradingEconomics.com
The USD 7 billion trade deficit, which was incurred in January and February at the height of the COVID-19 crisis in China, has been thwarted in March, with better-than-expected import and export numbers.
Even though the impact from the economic turmoil is more than clearly visible on the chart above, the moderately better-than-expected performance in the wake of the crisis gives investors a glimmer of hope for quick recovery.
This happens as the Chinese industrial activity starts to normalise, and individuals return to their workplaces.
Even more importantly, however, the data illustrates the resilience of the global supply chains, which has been questioned on multiple occasions during the Chinese lockdown. This is an important condition for the eventual economic recovery.
The gradually improving Balance of Trade in China is also going to affect the Yuan positively over the next several months. The Chinese currency has been hit severely by the global economic contraction.
Nevertheless, the situation is slightly more different in the short run. The USDCNY pair appears to have reached a bottom at the end of last week, which is likely to be followed by a new bullish upswing.
This assertion is made by examining the underlying price action using the 1-5 impulse wave pattern, which is postulated by the Elliott Wave Theory.
Meanwhile, the underlying market environment continues to be trending, albeit at a very moderate pace.
USDCNY 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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