The offshore Chinese Yuan (CNH) was steady at about 7.14 against the US Dollar on Monday. Investors are being cautious as they wait for the official Purchasing Managers Indexes (PMIs) and the RatingDog PMI, set to be released on Tuesday. These numbers will provide insight into China’s manufacturing and services sectors. These figures are crucial for assessing China’s economy, especially given weak domestic demand and ongoing trade tensions. In August, the NBS Manufacturing PMI slightly rose to 49.4 but still indicates contraction for the fifth consecutive month. New orders saw a small increase, while exports fell further, highlighting issues with global demand.

Recovery in Non-Manufacturing Sector

The NBS Non-Manufacturing index reached 50.3, suggesting modest growth. The RatingDog Services PMI increased to 53, fueled by a rebound in tourism and export services. The RatingDog Manufacturing PMI also rose to 50.5, marking the first time it’s entered the expansion zone since spring due to increased domestic orders. For September, analysts expect an NBS Manufacturing PMI of 49.6 and a RatingDog Manufacturing PMI of 50.3. Markets are closely watching these figures for any signs of economic change, particularly given low bank credit and slow real estate performance. Technical analysis of the USD/CNH pair indicates resistance at 7.1500 and support at 7.1355. As we near the end of September 2025, the Yuan remains stable near 7.14 against the dollar, but we are preparing for possible volatility. This caution arises from China’s recent economic performance, where Q2 GDP growth was 4.5%, falling short of expectations mainly due to ongoing weakness in the real estate market. The upcoming PMI data is critical and could trigger significant market movements. We are keenly observing the differences between the two main PMI reports, a trend noted back in August 2025. The official NBS report, which reflects large state-owned firms, showed manufacturing contracting for five months, while the RatingDog PMI, which focuses more on the private sector, recently returned to expansion. This discrepancy suggests an uneven recovery, making it risky to make strong bets in one direction before the new data arrives.

Challenges for the Yuan

The broader economic context is also impacting the Yuan, creating tough conditions for it to strengthen. The People’s Bank of China is trying to support growth, evident from its recent cut in bank reserve requirements. In contrast, the US Federal Reserve is maintaining a tight policy with its key interest rate at 4.75%. This difference favors a stronger dollar, limiting any potential rallies for the Yuan. For traders using derivatives, this situation is perfect for strategies that benefit from volatility instead of direction. A long straddle on USD/CNH, which involves buying both a call and a put option for early October, could work well. This strategy would be profitable if the PMI data leads to significant movement in either direction, protecting against uncertainty from the economic release. Technical indicators provide clear guidance for our short-term trading strategies. A break above the 7.1500 resistance level after strong data would suggest a bullish shift, making call options targeting 7.1700 appealing. Conversely, if weak data drives the pair below the 7.1355 support level, we would consider put options to profit from a possible decline towards the 7.1200 area. Create your live VT Markets account and start trading now.

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