China’s Manufacturing PMI Beats Forecasts at 50.4 — Is the CNY Entering a Bullish Phase? 31-Mar-25

🗓 Event Recap:

• Event: China Manufacturing PMI

• Release Date: March 31, 2025 – 6:30 AM (GMT+5)

• Actual: 50.4

• Forecast: 50.2

• Previous: 50.2

A solid beat above expectations — and more importantly — a continued move above the 50.0 expansion line, reflecting four consecutive months of manufacturing growth. This is technically and fundamentally bullish for the Chinese Yuan (CNY).

📚 Past Performance Review: PMI Trend

👉 Trend Insight: The PMI has shown a clear upward trajectory since Q3 2024, forming a macro higher-low structure — a classic early sign of economic recovery.

🧠 Technical Knowledge Application – FX Trading Perspective

Let’s apply technical trading concepts to analyze how this PMI release could affect USD/CNY and other currency pairs. 

🔹 USD/CNY – Bearish Pressure Building

Current Price Action Structure:

• On the daily timeframe, USD/CNY has been moving within a sideways range between 7.20 (support) and 7.27 (resistance).

• The pair has printed lower highs, suggesting weakening bullish momentum.

🔧 Indicators:

• 50-day EMA is now flattening, possibly curving down — indicating loss of upward trend strength.

• MACD histogram is in bearish territory, signaling momentum shift.

• RSI (14) hovering near 45–50 = no oversold/overbought, room to fall further.

🔍 Technical Outlook:

• Break below 7.20 = confirmation of a bearish breakout, targeting:

  • 🔽 First target: 7.17

  • 🔽 Extended target: 7.12 (Fibonacci 61.8% retracement of the Oct–Feb rally)

🔄 Trade Idea:

• Sell USD/CNY below 7.20, with SL above 7.27, TP at 7.12 

🔹 EUR/CNY – Potential Double Top + Weak Eurozone CPI

Current Context:

• Germany’s CPI came in at 0.3% (below 0.4% forecast), showing inflation slowdown.

• Weak inflation + strong Chinese data = EUR weakness vs. CNY

Pattern Setup:

• Double Top formation near 7.83–7.85

• Support at 7.74 — if broken, opens downside to 7.68

Indicators:

• RSI Divergence noted at recent top (RSI lower while price was higher)

• MACD crossover just turned bearish on 4H and Daily

Outlook:

• Break of 7.74 could accelerate selling

• Short bias for EUR/CNY over next 1–2 weeks

🔹 AUD/CNY – Bullish Setup Confirmed by China PMI

Context:

• AUD has a strong correlation with Chinese manufacturing, due to Australia’s commodity exports.

• Strong Chinese PMI tends to lift AUD across the board.

Technical Setup:

• Ascending triangle breakout above 4.78

• Retesting the breakout zone = potential buy-the-dip opportunity

Indicators:

• Bollinger Bands widening = volatility breakout

• Stochastic recovering from oversold zone = bullish crossover

Outlook:

• Buy zone: 4.77–4.78

• Target: 4.85 short term, 4.90 mid-term

🔍 Key Technical Concepts Explained (for Clients):

• Support/Resistance: Price levels where buying or selling pressure usually reacts.

• Breakout/Breakdown: When price closes above/below a key level with volume or momentum.

• EMA (Exponential Moving Average): Helps identify trend direction.

• MACD (Moving Average Convergence Divergence): Momentum indicator. Bearish cross = trend weakening.

• RSI (Relative Strength Index): Measures strength. Overbought >70 / Oversold <30.

• Chart Patterns: Visual setups like double tops, triangles, and flags are signals for trade decisions.

📊 Correlation & Cross-Asset View

• CNY strength = pressure on USD, EUR, and JPY

• AUD and NZD may benefit from higher Chinese activity

• Commodities like Copper and Iron Ore are often used as early signals for CNY strength — traders will track them closely after this PMI data. 

🔮 Forecast – CNY and FX Market Outlook

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✅ Final Trading Recommendations:

1. USD/CNY short setups below 7.20 look attractive

2. EUR/CNY sell signals confirmed on double top + weak EU inflation

3. AUD/CNY long bias with pullback entries around 4.78

4. Watch April’s China PMI — a push above 50.5 would be a strong macro buy signal for risk assets.

🔍 Current Economic Condition:

China’s manufacturing sector appears to be stabilizing. A PMI above 50 means expansion, and this is now the third consecutive month with a positive reading. This trend shows:

• Stronger factory activity

• Better domestic and export orders

• Increasing business confidence

This improvement aligns with government stimulus efforts, infrastructure investments, and growing global demand.

💡 Fundamental Analysis:

Positives:

• A consistent PMI above 50 strengthens market sentiment.

• Reflects economic recovery and potential for increased exports.

• Boosts investor confidence in Chinese assets.

Risks:

• Global uncertainties (e.g., U.S.-China relations, supply chain issues)

• If global demand weakens, PMI growth may slow again.

Impact on Monetary Policy:

• Strong PMI reduces chances of immediate stimulus or rate cuts from the PBoC.

• If this trend continues, the central bank may shift toward a neutral stance.

🔮 Future Prediction:

If PMI continues to rise:

• CNY likely to strengthen further, especially against USD and JPY.

• China may become more attractive for foreign investments.

• Risk assets (like AUD, NZD) may benefit.

If PMI drops back below 50:

• Worries of economic slowdown may return.

• CNY could weaken, leading to higher USD/CNY and weaker AUD.

📌 Conclusion:

The latest China Manufacturing PMI at 50.4 shows slow but steady economic recovery. This has:

• Strengthened the Chinese Yuan

• Boosted investor confidence

• Suggested reduced need for monetary stimulus

Traders and investors should watch upcoming Chinese data closely. If this growth trend continues, CNY could appreciate more, especially against USD and EUR.