The US Dollar is expected to trade between 7.1170 and 7.1290 in the short term. UOB Group’s foreign exchange analysts believe the currency is likely in a range-trading phase, moving between 7.1120 and 7.1330 over a longer period.

Range Trading Insights

Recent analysis shows a narrower trading range of 7.1187 to 7.1273, without offering new predictions for future movements. The expectation is for the US Dollar to keep trading between 7.1170 and 7.1290 given the current conditions. Since last Friday, the outlook has remained unchanged, reinforcing the view that the US Dollar is stable within a range of 7.1120 to 7.1330. The FXStreet Insights Team includes journalists who gather market observations from various experts, providing valuable notes and insights from both commercial and analyst viewpoints. We see the USD/CNH pair settling into a range-bound trading phase, likely remaining between 7.1120 and 7.1330 for the next few weeks. The current price action does not suggest any new direction, indicating a period of consolidation. This sentiment is backed by a lack of immediate factors that could push the pair outside this tight range. For derivatives traders, this environment is ideal for strategies that benefit from low volatility and time decay. Selling options, such as through iron condors or short straddles with strikes outside the expected 7.1120-7.1330 range, could be an effective strategy. These positions thrive as long as the currency pair stays stable and does not experience a sudden breakout.

Economic Data and Stability

This stability is supported by recent economic data from both the US and China. China’s latest Q3 GDP figures showed growth at about 4.9%, and the People’s Bank of China has consistently managed its daily fixings to limit volatility. In the US, the Federal Reserve’s decision last week to keep interest rates steady, along with core inflation dropping to 2.8%, has contributed to calmer dollar movements. Market pricing reflects this stability, as we’ve seen one-month implied volatility in USD/CNH options fall to around 3.2%, a multi-month low. This suggests the market does not expect significant price changes soon. This is a stark contrast to the higher volatility we saw earlier in 2023 when uncertainty surrounding global central bank policies was at its highest. Looking back, the current stability is a shift from the more volatile times caused by inflation shocks in the early 2020s. With both the Fed and the PBoC showing a preference for stability, we believe the USD/CNH pair will likely remain steady. Thus, a strategy that capitalizes on this lack of movement seems most suitable. The main risk to this outlook would be a significant break below 7.1120 or above 7.1330. A move past these levels would indicate the end of the range-trading phase, prompting traders to quickly reassess their positions. Any unexpected geopolitical news or surprising economic data could trigger such a breakout. Create your live VT Markets account and start trading now.

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