The USD/CNH currency pair has hit a low for 2024, dropping to about 6.96. This fall followed a break below the lower edge of a descending triangle, with no recovery signs so far. If a short-term bounce happens, resistance may be found near the 50-day moving average at around 7.06. If the 6.96 level cannot hold, a decline to approximately 6.94 could follow.

Market Observations and Insights

The FXStreet Insights Team gathers market observations from experts, covering both internal and external analyses. This includes notes from commercial analysts and various insights for a well-rounded perspective. In late 2024, remember when USD/CNH broke below its descending triangle, pushing toward the 6.96 low? At that time, without clear rebound signs, the easiest path seemed to be downward, leading many to expect a further drop to 6.94. However, the 6.96 support became a crucial floor, coinciding with a change in fundamental drivers in early 2025. The People’s Bank of China reduced its one-year policy loan rate by another 10 basis points in the first quarter of 2025 to boost a sluggish economy, while the US Federal Reserve kept rates steady as inflation remained high. This divergence in monetary policy eventually overpowered the bearish technical setup and sparked a reversal.

Trading Strategies for Current Conditions

Looking back, the best approach in early 2025 was to buy cheap, out-of-the-money call options on USD/CNH, as implied volatility was low when testing the 6.96 support. When the pair failed to drop further and surged past the 7.06 resistance level, those who had bet on a stronger yuan based on the chart were forced to close their short positions. The pair then climbed higher for most of 2025, peaking at 7.28. Today, with the pair holding steady near 7.22, the main takeaway is to prioritize fundamental policy differences over purely technical signals. One-month implied volatility is low at 4.2%, indicating complacency and making option strategies cheaper. With the dollar’s ongoing yield advantage, traders should look to use any dips in the coming weeks to build long positions through instruments like bull call spreads, which provide defined risk while aiming for a potential rise. Create your live VT Markets account and start trading now.

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