Falling consumption in China, the country being one of the two benchmarks of stability, is demonstrative of slowing global recovery, particularly in Asia. To get a better grasp of the current state of currency markets in the region, check out our latest GBPJPY analysis.
Earlier today, the National Bureau of Statistics of China (NBSC) posted the latest consumption numbers for August. Chinese retail sales fell sharply from a month prior, exceeding the anticipated drop by the preliminary forecasts.
This is demonstrative of falling global consumption rates, particularly in Asia, which is indicative of slowing recovery. The results match the recent inflationary numbers in the U.S., confirming the decreasing pace of global demand.
Meanwhile, the dollar is struggling against the yuan in the short term. As can be seen on the 4H chart above, the USDCNY is currently developing a new downtrend. It takes the form of a 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory.
The final impulse leg of the pattern (4-5) has broken down below the 38.2 per cent Fibonacci retracement level at 6.4521 and looks poised to continue falling towards the 61.8 per cent Fibonacci at 6.4155.
Nevertheless, bears should be cautious. The price action has been establishing a Triangle pattern over the last several hours. If it manages to consolidate and then rebound from its lower limit (at 6.4350), a bullish reversal may ensue next.
However, if the price action penetrates below 6.4350 decisively, it would then most likely continue heading towards the 61.8 per cent Fibonacci.
Conversely, an attempted rebound from the lower boundary of the Triangle would have a difficult time ahead probing the 38.2 per cent Fibonacci, which is currently converging with the 50-day MA (in green).
According to NBSC's findings, retail sales rose by 2.5 per cent in August, a sharp decrease from the 8.5 per cent increase that was recorded a month prior. In contrast, the consensus forecasts were anticipating a 6.9 per cent growth in Chinese retail sales.
This marks the fifth consecutive month of waning consumption in the world's biggest economy.