A slight increase in downward momentum suggests that the US Dollar (USD) may test the 7.1200 mark against the Chinese Yuan (CNH). However, a prolonged drop below this level is considered unlikely. Analysts from UOB Group note that while downward momentum is building, the USD must consistently stay below 7.1200 for further declines. In the short term, the USD is expected to trade between 7.1300 and 7.1450. It previously reached a high of 7.1429 and a low of 7.1250. A break below 7.1200 is possible, but it shouldn’t last long due to resistance levels at 7.1330 and 7.1400. Over the next one to three weeks, the USD is predicted to fluctuate between 7.1200 and 7.1550. If the resistance level of 7.1460 holds firm, there’s still a chance of a drop below 7.1200. Support is noted at 7.1130 after 7.1200.

Downward Momentum and Key Support

Downward momentum for the US dollar against the yuan is increasing, making the key support level at 7.1200 more significant. While testing this level seems likely, analysts believe a sustained break below it is not expected anytime soon. Resistance levels are at 7.1330 and 7.1400. The dollar’s weakness is partly due to recent US economic data. The September 2025 inflation report indicated a cooling trend, with a year-over-year rate of 2.9%. As a result, the market now sees over a 60% chance that the Federal Reserve will cut rates in the first quarter of 2026. This has limited the dollar’s potential strength against most currencies, including the yuan. On the other hand, China’s third-quarter GDP for 2025 exceeded expectations at 4.8%, providing modest support for the yuan. This economic stability, along with a strong industrial sector, indicates that the People’s Bank of China can maintain steady policies, further supporting the yuan and putting pressure on the USD/CNH pair.

Strategic Trading Opportunities

With strong support at 7.1200, we see an opportunity to sell cash-secured puts with strike prices at or just below this level, expiring in two to three weeks. This strategy allows traders to collect premium, betting that this support will hold against the current downward trend. The main risk is if the USD closes below 7.1200 for more than two consecutive days. For those expecting a small drop rather than a major decline, a bear put spread could be a good option. Traders could buy a put option with a 7.1300 strike price and sell a put option with a 7.1150 strike price at the same time. This strategy offers defined risk while allowing for profit from a slight decline and protection against a sudden reversal. We should also remember the trading patterns from the past, especially when the pair spent extended periods above 7.2500 in late 2023 and early 2024. The current price action below 7.1500 marks a significant change over the past year. If the 7.1200 support holds as expected, a return towards the strong resistance level of 7.1460 is quite possible. Create your live VT Markets account and start trading now.

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