The offshore Chinese Yuan (CNH) was relatively stable on Monday near 7.14 against the US Dollar (USD). Investors remain cautious ahead of Tuesday's publication at 01:30 GMT of the official Purchasing Managers Indexes (PMIs) from the National Bureau of Statistics (NBS), as well as the RatingDog PMI at 01:45 GMT, released by Caixin Insight Group and S&P Global, formerly Caixin PMI and newly renamed RatingDog PMI.

These data, closely followed by the forex market, will provide an updated overview of China's manufacturing and services dynamics at a time when the economy continues to suffer from weak domestic demand and persistent trade tensions.

Fragile manufacturing, contrasting services

In August, the official NBS Manufacturing PMI recovered slightly to 49.4, but remained in contraction for a fifth consecutive month.

"Factory activity remains fragile, despite a recovery in production thanks to the extension of the Sino-American tariff truce", recalled the National Bureau of Statistics of China in its monthly report.

New orders (49.5) rose only slightly, while exports continued to decline (47.2), a sign of persistent weakness in global demand.

On the Non-Manufacturing front, the NBS index stood at 50.3, signalling a modest expansion after eight months of volatility.

However, surveys diverge. The RatingDog Services PMI jumped to 53 in August, its strongest growth since May 2024, buoyed by a recovery in tourism and export services.

As Lundgreen explains, "this divergence reflects different methodologies: the NBS heavily integrates real estate and retailing, sectors that are still struggling, while RatingDog better captures the momentum linked to leisure and travel".

On the industrial front, the RatingDog Manufacturing PMI stood at 50.5, back in the expansion zone for the first time since the spring. The improvement stemmed from a revival in domestic orders and an easing of the decline in exports. However, employment remained depressed, and companies continued to cut staff numbers out of an abundance of caution.

With the September figures approaching, the consensus forecast is for an NBS Manufacturing PMI at 49.6 and a RatingDog Manufacturing PMI at 50.3. The markets will be watching for any signs of acceleration or, on the contrary, of loss of momentum, in a context marked by weak bank credit, sluggish real estate and margins still under pressure from deflation.

Technical analysis of USD/CNH: Key test for the rebound

USD/CNH 4-hour chart. Source: FXStreet.

The USD/CNH pair broke upward through its descending resistance line at 7.1380 on Thursday, but now faces new resistance at 7.1500, a level that has acted as both support and resistance in the past.

It will, therefore, be necessary to break above this threshold before considering a more solid bullish recovery, with potential targets at 7.1700 and 7.1900 thereafter.

On the downside, the first support comes at 7.1355, where the downtrend line currently lies. Below this, USD/CNH could test the 100-period Simple Moving Average (SMA) on the 4-hour chart, currently at 7.1208.