Trading plan for 31/08/2018

During the night, China's PMI data was released. The readings turned out to be better than expected, which may surprise us after reports of the slowing economy and trade problems. Data from Japan did not surprise us at all, they were mostly in line with forecasts. Trump threatened that the US would withdraw from the World Trade Organization if it was still not treated fairly.

On Friday, the 31st of August, the event calendar is quite busy with important data releases. The most important will be German Retail Sales data, Italian GDP data, French CPI data and Eurozone CPI data. During the US session the market participants attention will focus on Canadian Raw Materials Price Index data and some data from the US: Chicago Purchasing Managers Index data and UoM Consumer Sentiment data. No speech is scheduled for today.

USD/CNY analysis for 31/08/2018:

Overnight China published data on PMI. Both in terms of industry and trade, there was a positive surprise for the country. PMI Manufacturing is at the level of 51.3 pts (versus expected 51.0) as compared to 51.2 pts a month ago. PMI for services was 54.2 points against the forecasted 53.8 points (previously 54 points).

After a two-month delay, growth in the Chinese industrial manufacturing sector is not a huge shock. It is a certain cushioning for the sluggish economy in the current climate, when the United States is rapidly increasing tariffs on Chinese goods. Breath of breath, however, may be short. Export orders have contracted for the third month in a row, which suggests that US sanctions are starting to operate more and more.

Let's now take a look at the USD/CNY technical picture at the daily time frame chart. The market has made a local swing high at the level of 6.93, but there is a clear and visible bearish divergence between the price and the momentum oscillator, so the corrective pull-back might be in progress. The next technical support is seen at the level of 6.71, but first, there is 23.6% Fibo retracement level at 7.76. Larger time frame trend remains bullish.

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