January 2026 market watch: 3 key trade setups as China macro shifts

China macro turning supportive: Deflation risks are easing as policy pivots toward pro-growth and pro-private sector measures, with CPI firming, core inflation stable, and manufacturing PMI returning to expansion for the first time since March 2025.

Hong Kong equities holding bullish structure: Hong Kong 33 CFD index is consolidating above its 200-day moving average within a long-term ascending channel, with improving momentum signalling potential upside if 27,500 resistance is cleared.

AUD/USD breakout remains intact: AUD/USD is holding above key short-term support after a major bullish breakout, suggesting scope for further gains as long as 0.6590 holds.

USD/CNH downside risks increasing: CNH strength below 7.00 and a sustained medium-term downtrend raise the odds of USD/CNH transitioning into a broader bearish phase if key support at 6.9710 breaks.

We kick off 2026 by spotlighting three key instruments to watch in January: Hong Kong 33, USD/CNH, and AUD/USD, framed around a potentially improving macro backdrop in China’s economic growth and the latest momentum factors from technical analysis.

China’s policy stance in 2025 marked a clear break from the restrictive approach of 2021–2022, which was defined by property “red lines,” anti-monopoly actions, and crackdowns on private education that undermined business and consumer confidence. The focus has since shifted toward restoring private-sector confidence and accelerating technological advancement through more supportive and pragmatic measures.

This pivot was underscored by the first private enterprise symposium in five years, held in February 2025 and hosted by President Xi, signalling a meaningful easing of regulatory pressure. These efforts were reinforced by so-called “anti-involution” policies which, while compressing fixed-asset investment to a cumulative -2.6% through November 2025, have helped stabilise prices and materially reduce the risk of a deflationary spiral.

China’s headline CPI accelerated to 0.7% y/y in November 2025, its highest level since March 2024, while core CPI (excluding food and energy) remained steady at 1.2% y/y.

In addition, the official NBS Manufacturing PMI unexpectedly rose to 50.1 in December 2025, surpassing both November’s reading and expectations of 49.2. It marked the first expansion in factory activity in China since March 2025 (see Fig. 1).

Since hitting a 52-week high of 27,401 on 2 October 2025, the price actions of the Hong Kong 33 CFD index (a proxy of the Hang Seng Index futures) have managed to consolidate above its 200-day moving average and traded in the upper half of a major ascending channel in place since 22 January 2024 low (see Fig. 2).

Additionally, its daily RSI momentum indicator recently staged a bullish breakout on January 2, 2026, suggesting a potential revival of medium-term bullish momentum.

Watch the 24,765 key medium-term pivotal support (also the 200-day moving average) on the Hong Kong 33 CFD index. A clearance above the 27,500 major resistance may see the next resistances coming in at 28,250 and 29,420.

On the other hand, a break and a daily close below 24,765 invalidates the bullish scenario for a deeper correction sequence to unfold that may expose the 23,185/22,670 long-term pivotal support zone (also the lower boundary of the major ascending channel).

The AUD/USD has staged a major bullish breakout on 5 December 2025 from its former long-term secular descending trendline that capped previous rallies since the 25 February 2021 high (see Fig. 3).

The latest price actions of the AUD/USD have managed to trade above its rising 20-day moving average that is acting as a key intermediate support at around 0.6660, where it staged a rebound on 2 January 2026.

Watch the 0.6590 key medium-term pivotal support to maintain the potential bullish tone for the next medium-term resistances to come in at 0.6760/0.6800 and 0.6940.

On the flipside, a breakdown below 0.6590 suggests a failed bullish breakout that may see a further corrective slide to retest the next support at 0.6505 (also the 200-day moving average).

China’s offshore yuan (CNH) has continued to strengthen further against the US dollar on Wednesday, 31 December, the last trading day of 2025, after it breached below the important psychological 7-per-dollar mark for the first time since September 2024 on Tuesday, 30 December, and recorded its largest annual gain of 4.8% against the greenback since 2020.

The medium-term downtrend phase of the USD/CNH remains intact since its 8 April 2025 high of 7.4294. A break with a daily close below the key 26 September 2024 swing low of 6.9710 may transit into a major downtrend phase for the USD/CNH to expose the next medium-term supports of 6.8960 and 6.8290 (see Fig. 4).

However, a clearance above the 7.0850 key medium-term pivotal resistance (also the 50-day moving average) invalidates the bearish tone for a potential corrective rebound for the next resistance to come in at 7.1525 (also the 200-day moving average).