USD/CNY: Break above 6.8250 to clear the way towards 6.9625 – TDS

China's activity falls sharply. As such, Chinese weaker growth trajectory will add to pressure on its markets. Economists at TD Securities expect further CNY depreciation. 

Slow recovery ahead

“China's April data slate was unambiguously weak, with IP and retail sales sliding. The data highlight the risks of a contraction in GDP this quarter and provide evidence that the ‘around 5.5%’ official growth target looks increasingly out of reach. Strict zero-COVID policy means that any easing in restrictions will be gradual and growth will only recover slowly.”

“China's weaker growth trajectory will add to pressure on its markets (weaker equities and weaker CNY), and fuel a further worsening in global economic prospects, weighing on risk assets.”

“While the drop in the CNY will likely slow in the weeks ahead we expect further CNY depreciation, with a test of the 76.4% Fib retracement level at 6.9625 on the cards following a likely break of the 61.8% retracement around 6.8250.”