The weakened dollar is currently attempting to strengthen against the Chinese yuan despite China's better-than-expected GDP growth numbers for the fourth quarter. To read more about the current state of the greenback, have a look at our latest EURUSD analysis.
Earlier today, the National Bureau of Statistics of China (NBSC) revealed that China's economy expanded at a faster pace than initially anticipated, beating the preliminary forecasts. Meanwhile, the USDCNY appears to be in the process of establishing a new major consolidation range.
As can be seen on the daily chart above, the downtrend of the USDCNY has recently bottomed out around the major support level at 6.3450. This newly emerging consolidation range could pan out to be a major Accumulation, as postulated by the Wyckoff Method. It follows that the USDCNY may be in the very early stages of transitioning into a new uptrend.
The Accumulation range itself spans between the aforementioned support and the 23.6 per cent Fibonacci retracement level at 6.3792. Presently, it converges with the upper area of the regression channel.
Notice that the latest downswing appears to be structured as a 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory. Its evident completion above 6.3450 further corroborates the expectations for the completion of the downtrend.
Once the price action is ready to attempt breaking higher, the first target would be the 23.6 per cent Fibonacci, where a likely correction could emerge from. A higher target would be the 38.2 per cent Fibonacci at 6.4044.
According to NBSC's findings, China's economy expanded by 4.0 per cent in the three months ending December 2021. Even though this measures a significant contraction from the 4.9 per cent expansion that was recorded over the previous quarter, the performance beat the preliminary forecasts of 3.3 per cent.
China's economic growth represents a key benchmark of global stabilisation, being the fastest-growing economy in the world. That is why today's numbers could provide a temporary reassurance for investors following the recently observed inflation spikes elsewhere.