• FAI growth slowed sharply
• Retail sales moderated in April
• Trade data weakened;
• IP growth softened further from Q1 levels
• Inflation remains subdued
  
  April's economic data upsets almost across the board. YTD fixed asset investment (FAI) growth fell sharply to 12.0% YoY in April from 13.5% in March, signaling challenges ahead amid the ongoing property-market correction. Soft economic activity is keeping inflation low. While industrial production (IP) growth improved slightly to 5.9% YoY, the rate was still lower than in Q1, implying that Q2 GDP growth will also be slower (we forecast 6.7% YoY).
  
  In international trades, both exports and imports missed expectations, suggesting a slow and uncertain recovery in overseas demand. Surprisingly low M2 growth indicates that monetary easing alone may not be sufficient to boost demand quickly.
  
  Monetary Policy outlook
  
  As growth weakness continues, and GDP growth is likely to fall below 7% YoY in Q2 (7.0% in Q1). Against a backdrop of growth risks and subdued inflation, we expect the PBoC to maintain a prudent monetary policy stance with an easing bias to stabilize growth.
  
  The PBoC has been lowering USDCNY's reference rate since around mid-March but the spot rate remains around the same level, apart from a big slide which kicked-off the aforementioned reference rate tightening cycle and looked suspiciously like PBoC intervention to us. This is bringing the spot rate closer and closer to the pair's artificial ceiling - set by the PBoC 2% away from its reference rate.
  
  Technical and Derivatives Watch: (USDCNY)
  
  On daily charting pattern we spotted out a bearish engulfing candlestick occurred substantiating a bearish trend as stochastic evidencing %K line crossover and RSI (14) also evidences downward convergence with price line which is again bearish signal.
  
  As a medium term bearish trend conviction we would like to recommend the strategy that would hedge the potential downside forex risk.
  
  Option strategy: Bear Put Spread
  
  The strategy reads this way, buy a Put option and sell another Put at a lower strike price (usually OTM) for a net debit.
  
  Use this strategy over a long Put when Puts are overpriced or costlier or the underlying currency is only expected to move marginally lower.