In what is a big week for global economic data, China kicked off today with their Manufacturing PMI for April.
Official Chinese PMI Manufacturing data came in at 50.1 for April, which was below the expectations of 50.5.
Investors are watching the world’s second-largest economy closely for signs of weakness as global markets continue to rally, with the S&P500 up over 17 per cent in 2019.
A reading above 50 indicates expansion, highlighting continued growth for the Chinese manufacturing sector.
Bloomberg noted, ‘The Australian dollar, seen as a proxy for bets on China’s economy, declined, while the nation’s bonds pared a drop in the wake of a decline in the Chinese manufacturing PMI for April.’
Key technical levels to watch on the China A50
You will notice the market had reacted slightly before the Chinese Manufacturing PMI data announcement by breaking the short-term support level on the 5-minute chart.
Once the news hit that results came in lower than expected, the selling intensified, pushing the China A50 index down as much as 60 points within the first 10 minutes.
Following an initial rally, the market then sold off heavily with a bearish engulfing pattern, wiping out the previous 15-minutes of buying activity.
From there, the market saw that as a sign to jump in and the buyers pushed the index back to where it was before the data print.
What is interesting is leading up to the announcement on the hourly chart; you can see the long-term trendline (100 period SMA) is trending lower.
This has helped form the descending triangle. But it appears the market isn’t quite ready to sell the market off, instead, buying all signs of weakness down around the 13,540 level.
When combined with recent US reports and the fact the figure printed above 50, it appears traders have taken this as a short-term positive for overall economic conditions. Or it could just be an opportunity to trade the short-term volatility.
When we cross to the daily chart (below), we can see the China A50 recently bounced off the short-term support level.
But on a medium-term note, we are keeping an eye on a potential head and shoulder top, with the right shoulder highlighted in yellow. Perhaps at this stage, the right shoulder needs to develop by pushing higher from here.
This may be an excellent opportunity to set your target breakout levels via alerts within MT4 for opportunities around here.
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Despite a raft of important data releases on the economic calendar, all eyes are fixed on Washington as the US election hits the home stretch.