• Shanghai Composite and Shenzhen Component experienced losses, with a 0.54% and 0.29% decrease respectively.

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• Investors awaited the People’s Bank of China’s decision on the loan prime rate.
• China’s central bank recently cut key short-term lending rates to support the economy amid a faltering post-pandemic recovery.
• Downgraded GDP growth forecasts for 2023 due to lower-than-expected industrial production and retail sales in May.
• Heavyweight firms, including Kweichow Moutai, Wuliangye Yibin, Talkweb Information, Contemporary Amperex, and Longi Green Energy, faced notable losses.
• Offshore yuan weakened, reaching its lowest levels in nearly seven months.
• Chinese authorities mentioned a slowdown in global trade and investment as factors affecting the economic rebound.

The dollar demonstrated a 0.5% rise against the Chinese Yuan as market participants eagerly awaited the decision on the loan prime rate, which is anticipated to decrease and could further impact the Yuan’s value. In the daily interval, there are indications of a potential establishment of a balanced price range, with a focus on targeting the highs for potentially absorption and to build core Yuan long positions.

From a short-term perspective, the market shows an upward trajectory towards the swing highs from the previous week. Additionally, two previous VWAP close levels could act as a source of support for the Yuan, depending on the outcome of the loan prime rate decision.

An interesting development that could bolster the Yuan’s strength is the potential listing of Hong Kong Exchange-listed companies in Chinese Yuan. This move, as reported, could stimulate increased demand for the currency, presenting a potential bullish factor to consider.

The Chinese Yuan may experience a position balanced position against other major currencies due to the anticipated likelihood of higher demand. However, the implementation of supportive monetary measures could exert pressure on the Chinese currency which should be main opposite reason to be rotational.

The Yuan (CYB) could potentially strengthen against the dollar if there are indications of a dovish stance from the US Federal Reserve, suggesting the possibility of an earlier-than-anticipated interest rate cut in the current year.

Given the geopolitical situation, caution is warranted when considering the long-term direction of the Yuan, as any significant headlines or developments could have an impact on its value in the short- to medium-term perspectives.

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