The economic data of Chinese industrial production published today shows a clear upward path for the Asian giant's economy.
A rise of 5.6% (YoY) in August vs. 5.1% expected and well above the 4.6% of the previous month is an obvious sign that China has overcome the crisis and that as the locomotive of the world economy, it will have a positive effect on the economic evolution of the rest of the countries of the world.
An immediate effect of China's good performance is reflected in the price of its currency, the Yuan. The Chinese currency has strengthened to levels not seen in April 2019 with the USD/CNH price very close to a significant support level located at 6.67, below which the upward movement of the Yuan could accelerate.
In any case, it must be taken into account that the Chinese monetary authorities control this currency and its future evolution depends more on political decisions than on market forces. But its strengthening undoubtedly contributes to the weakness of the Dollar across the board.
In fact, with the decline in USD/CNH today, primarily driven by the excellent news published, the rest of the pairs of the US Dollar have had a similar movement by correlation.
In the case of GBP/USD, it has stopped the downward movement that it had been experiencing for a week, motivated by Boris Johnson's break with the previous Brexit agreements with the European Union.
This issue continues to be of great concern to investors as a no-deal exit would have a significant negative impact on the UK economy.
However, the weakness of the Dollar seems to be mitigating this selling flow of Sterling Pounds. At the moment, the pair continues to have a downtrend as long as it does not overcome the resistance located around 1.3000 at a daily close.
The most consensus in the market is that of a bearish Sterling in the medium term that would take the pair to the low zone of 1.20. Still, this trend could be slowed by new selling Dollar flows in a potential scenario of better economic data and recovery of the stock markets.
In this sense, it is necessary to take a look at the TECH100 index, which is the one that suffered the sharpest decline in recent days, mainly due to an excess of long positioning through financial derivatives.
The index is still trending downtrend within a bearish channel whose upper limit now passes through the 11400 zone. If this bearish channel is broken to the upside, it encounters significant resistance around 11585.
An overcoming of this level would give us the first sign that the recent downtrend has ended, and the index would be ready for further advances.