Container - MSC China IMO 9122411. Image source: Bob Adams, flickr.com
The weakened dollar continued to lag behind exotic currencies during the morning session, following the release of the Chinese trade balance numbers for November. The greenback's previous rally may thus be coming to an end. Read more about it from our latest EURUSD analysis.
Earlier today, it was revealed that China's trade balance had shrunk surprisingly in November owing to weak global demand. Chinese imports accelerated by 31.7 per cent compared to imports' increase of 22 per cent year-on-year, leading to the first crunch in the trade balance since March. The struggling dollar extended its losses against the yuan.
USDCNY 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the daily chart above, the USDCNY is about to probe the major support level at 6.3570. The latter was last tested (unsuccessfully) in early June, highlighting its significance.
Notice that the current downtrend, as underscored by the descending channel, is taking the shape of a 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory. Seeing as how the price action is currently developing the final impulse leg (4-5), a bullish pullback may be due soon. The previous swing low at 6.3570 seems like the best place for this.
At the same time, the ADX indicator continues to thread above the 25-point benchmark, underlining the strength of the downtrend. That is why traders should not expect an immediate trend reversal.
Furthermore, the 20-day MA (in red) is running parallel to the channel's upper limit, making it less likely for a decisive breakout above the latter in the near future. The underlying bias thus remains ostensibly bearish-oriented.
China's waning exports
China MoM Trade Balance. Image source: TradingEconomics.com
China's trade surplus decreased to $7.17 billion in November vs $83.2 billion expected. This marks a sizable depreciation from a month earlier when the trade balance was reported at $84.5 billion.
This performance reflects a sizable drop in global demand, also underpinned by a parallel crunch in energy demand. Simultaneously, the pace of U.S. jobs creation decreased while the Omicron scare continues to rise.
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