The offshore Chinese Yuan (CNH) remained stable at around 7.14 against the US Dollar (USD) on Monday. Traders were cautious as they awaited important data set to be released, including the official Purchasing Managers Indexes (PMIs) on Tuesday. These PMI figures will provide insights into China’s manufacturing and services sectors, which are facing ongoing economic issues. The official NBS Manufacturing PMI for August slightly improved to 49.4, but it has remained below 50, indicating a contraction for five consecutive months. New orders grew slightly to 49.5, while exports fell to 47.2, showing weak global demand.

Growth In Non-Manufacturing Sector

The NBS index for non-manufacturing showed slight growth at 50.3, with mixed results from different surveys. The RatingDog Services PMI jumped to 53 in August, the highest level since May 2024, boosted by a recovery in tourism and exports. The RatingDog Manufacturing PMI increased to 50.5, indicating expansion due to growth in domestic orders. However, employment continues to lag behind. For September, forecasts suggest the NBS will be at 49.6 and RatingDog at 50.3, with the market paying close attention to shifts in momentum amid soft economic indicators. The USD/CNH faced resistance around 7.1500, with possible targets upward at 7.1700 and 7.1900. Support is at 7.1355 and 7.1208, as indicated by the 100-period SMA on the 4-hour chart. With the offshore Yuan (CNH) near 7.31 against the Dollar, we are monitoring the market’s response to this week’s key economic data. The September NBS Manufacturing PMI, released on Tuesday, came in at 49.5, lower than the forecast of 49.6, marking six months of contraction. This indicates that factory activity at major state-owned companies remains weak.

RatingDog PMI vs NBS PMI

In contrast, the RatingDog Manufacturing PMI rose to 50.8, surpassing expectations of 50.3. This difference suggests that smaller, export-focused companies are managing better, even though the overall domestic economy is struggling. This mixed picture highlights the uncertainty surrounding the Chinese economy over the past year. The ongoing weakness is largely due to the property sector, where investment fell over 12% year-over-year through August 2025. This trend continues from 2024, indicating that government stimulus measures have not yet restored domestic confidence. Weak internal demand limits the chances of significant economic recovery. Technically, the USD/CNH pair is encountering strong resistance at the 7.3200 level. A significant break above this could lead to movements toward earlier highs of around 7.3500. Initial support is at the 50-day moving average around 7.2850. Given the mixed economic signals, traders might find opportunities in volatility rather than clear direction. Implied volatility on USD/CNH options remains below the highs of 2022, making strategies like buying straddles appealing to capitalize on potential price swings without betting on a specific direction. We must also consider the impact of the US Dollar, as the Federal Reserve’s policies play a crucial role. Recent US inflation data has shown signs of cooling, sparking discussions about a possible rate cut from the Fed by early 2026. Should the Fed signal a dovish shift, it could weaken the dollar, possibly capping gains for the USD/CNH pair even if China’s data remains poor. Create your live VT Markets account and start trading now.

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