The US Dollar (USD) against the Chinese Yuan (CNH) is expected to trade between 6.9720 and 6.9920. Analysts at UOB Group suggest there might be a test of 6.9590 due to oversold conditions and weaker momentum. In the last session, the USD bounced back to 6.9915 and closed at 6.9827, which is a 0.17% increase. The forecast remains that the USD will stick to this range unless it breaks above the 6.9950 resistance level.

Market Observations

The FXStreet Insights Team, which includes journalists and analysts, gathers important market observations from top experts. Gold has dipped slightly but is still above $4,450, supported by geopolitical tensions. Bitcoin is facing resistance around $93,000, while Ethereum and Ripple may see some profit-taking. In other areas, GBP/USD has pulled back after reaching a three-month high, now trading below 1.3550. Solana continues to rise, trading above $137, due to increased institutional interest and over $16 million in spot ETF inflows. Despite ongoing concerns in Venezuela, current market forecasts remain steady, showing resilience amid political instability.

Economic Indicators

Back in January 2025, we believed the dollar would trade narrowly against the yuan, likely between 6.9720 and 6.9920. At that time, we saw the pairing as deeply oversold, indicating any further declines should be limited. The key resistance level was 6.9950. However, the yuan strengthened more than we thought in the following weeks. China’s Q4 2024 GDP data, released mid-January 2025, surprised us with a 5.4% growth rate, boosting confidence in their recovery from the pandemic. On the US side, inflation data for December 2024 came in softer than expected at 3.0%, increasing the likelihood of Federal Reserve rate cuts. This difference in economic outlook put pressure on the dollar, causing the USD/CNH pairing to fall below the identified support level of 6.9590. Currently, with USD/CNH trading around 6.8800, implied volatility in USD/CNH options is at multi-month lows. This suggests the market is calm and anticipating stability. Strategies like selling straddles or strangles could be effective for collecting premiums, betting on a steady range before the Lunar New Year. For those who think China’s current policy support may be lacking, buying inexpensive out-of-the-money call options on USD/CNH could be a cost-effective way to prepare for a potential rebound. Last year showed that fundamental data can quickly outpace technical trends. We need to keep a close watch on upcoming trade balance figures for hints of a weaker export market. Create your live VT Markets account and start trading now.

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