19.10.201807:35 Forex-elemzések és áttekintések: Global macro overview for 19/10/2018

Before the GDP and Industrial Production data was published, the Chinese banking and insurance regulator said the systemic risk is under control. The head of the institution asked financial companies for appropriate risk management in the stock markets and encouraged the insurance sector to invest in listed companies. The regulator will also allow insurers to create products that help solve liquidity issues related to the exposure to the stock exchange. It seems that this is an attempt to scare the falling stock market by injecting funds from the insurance sector.

The People's Bank of China has once again weakened the value of the yuan. The central reference rate was set at 6.9387 (compared to yesterday's 6.9275). This is the highest USDCNY level since the beginning of January 2017. The CEO of PBOC said that the movements on the stock market are mainly related to the sentiment prevailing among investors and their expectations. The fundamental factors of the Chinese economy remain strong, and the valuation of shares is underestimated, it does not correspond to the situation of the country. The central bank is considering introducing tools to help solve problems with financing companies. He intends to use monetary policy to increase lending to private companies. The Shanghai Composite index has already lost over 30% since the top of January 29.

The Chinese GDP growth in the third quarter of the year was 6.5% y / y with market expectations at 6.6% (previously 6.7%). This is the weakest result since the first quarter of 2009. This does not mean panic in the Chinese market, this value is in line with the goal set by China for this year. The consumer contribution has slightly disappointed, but the weakening of the value of net exports is also visible. The full effect of tariffs introduced by the United States should only be visible from next year. The growth of industrial production may be more worrying. In annual terms, it amounted to 5.8% with forecasts at 6.0% (previously 6.1%). Retail sales looked better. The median of analysts' expectations was 9.0%, and the final result was 9.2% y / y.

Let's now take a look at the USD/CNY technical picture at the daily time frame after the data were published. The market is moving inside of the upward channel and currently is very close to the last swing high made December 2016. The top is located at the level of 6.96 and any violation of this level will open the road to the round number 7.00. The momentum is strong and positive, but the market conditions look now extremely overbought, so some king od shallow pullback might occur before the final attack at the top.