CNY desperate to spot out cushion for economic strength

FAI growth sluggish: YTD fixed asset investment (FAI) growth slid sharply, slowing to 12.0% from 13.5% in March and reaching a 14-year low. This was largely driven by a continued slowdown in property investment growth, which fell to 6.0% YTD from 8.5% in Q1 (2014: 10.5%), and softening manufacturing investment.

Disappointing domestic activity data: The domestic activity data for April was lower than expected that is led by weaker IP numbers. Even though industrial production (IP) growth improved marginally to 5.9% YoY from 5.6% but the consensus was at 6.0%.

Both put together with contracting exports & imports and subdued inflation, the April data point to further weakening in domestic demand and soft external demand which could weigh on Q2 GDP.

Technical and Derivatives Watch:CNYJPY

On daily and weekly charting we foresee a trade to remain n sideways as CCI & RSI (14) indicates the convergence with this stagnant range bound movement. Fast stochastic also does not evidence any significant signals on either side. On upside the near resistance seen at 19.392 and potential support to test at 19.265.

However, with weak fundamental elements we advocate the Shorting Futures on every bounces on this pair.

Margin Play: Suitable risk limits should be predetermined on margin before entering into the futures contract and the activities of the trader should be monitored regularly to ensure that the risk limits are adhered to. Margins are specified by the exchange based on volatility of the underlying currency but cannot reduce the margin below the exchange margin.