USD/CNH, AUD/USD: Spluttering services sector activity in China is hardly new news

China’s services sector continues to slow, generating renewed downside pressure on the offshore Chinese yuan and Australian dollar against the US dollar. But with the data merely confirming what many already knew, and with policymakers continuing to rollout fresh stimulus measures, it’s questionable whether the selling will last.

Caixin Services PMI hits CNH, AUD hard

The Caixin China general services PMI fell to 51.8 In August from 54.1 a month earlier, hitting the lowest level this year. While above 50 indicating an expansion in activity levels, the slowdown adds to evidence that weakness in China’s manufacturing sector is now spreading to larger parts of the economy. Within the report, new orders declined for the first time this year while input price inflation eased by the most in six months.

All very gloomy but hardly different to the message contained in the government’s own services PMI released last week. It’s not only known information but explains why Chinese policymakers are actively moving to stimulate domestic demand already, pointing to the potential for the initial market reaction to fade.

Source: Trading View

USD/CNH broke the downtrend that’s been in place on the 4-hourly chart following the PMI release but has since pulled back. A failure to sustain the break may see a pullback towards minor support at 7.2700. Below that, long-standing uptrend support is located around 7.2500.

As mentioned previously, the catalyst for the move was largely identical to information received last week and we’ve seen a lot of new positive news flow since then.

-- Written by David Scutt

Follow David on Twitter @scutty

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.