• PBoC surprises with historic 25bp cut
  • CN50 trapped within daily range
  • ADX indictors signals rising momentum
  • Elliot wave in corrective “ABC” phase
  • Key levels of interest at 11693 & 11540.5

CN50 which tracks the benchmark FTSE China A50 Index may be set to rally further as the Peoples Bank of China (PBOC) cut its Five-year rates by 25 basis points to 3.95%, a record rate cut.

With the Chinese economy experiencing deflationary pressures, the PBOC unlike its Western counterparts is tasked with keeping rates lower to boost consumption. 

Since reaching the low on Jan 2024, CN50 has rallied over 10%.

CN50 may have entered a trading range over the last 3-trading days, with channel resistance at 11693, and channel support at 11540.5. 

The index bulls may be looking for a retest of 11693, with the following near-resistance levels in sight.

  • 11802.8: - The 161.8 golden Fibonacci level

  • 12000: - A psychologically important round number level which at the time of writing coincides with the 200-day Exponential Moving Average

CN50 bears on the other hand may be looking out for a strong close below 11540.5 (the channel support).

  • A breach of this channel’s support may see prices decline further to 11341.0. (The 100 Fibonacci level which at the time of writing, coincides with the 50-day EMA.

  • A breach above the 11693-price level will encourage the index bulls (those looking for the index to rally further) to test the 11821.8 price at the golden (161.8) Fibonacci level. 

The Fibonacci level is drawn from January 24th, high of 11341 to January 18th, low of 10590.2.

Furthermore, the Average directional movement index, (an indicator that highlights trend strength), points upwards, rising from a valley, indicating trend strength. 

From an Elliot Wave perspective on the daily time frame, the index may be entering a corrective A-B-C phase before a further rally.