The USD/CNH currency pair is going down because the US Dollar is getting weaker, while the Chinese yuan (CNY) has a strong daily fix. The People’s Bank of China (PBoC) continues to support a controlled increase in the renminbi (RMB). Recently, the USD/CNH was at 7.0536, according to analysts at OCBC. The PBoC’s strategy for RMB appreciation is still in place. The latest fix is the lowest in 14 months at 7.0638. This careful approach helps prevent sudden increases that could disrupt USD conversions by exporters and keeps the market stable.

Market Momentum Analysis

Market momentum is flat right now, with the Relative Strength Index close to oversold levels. Support is found at 7.05 and 7.0380, and there could be a sharp decline if these levels are broken. Resistance is at 7.08, which aligns with the 21-day moving average. The overall market analysis shows trends in related markets. Gold prices are nearing record highs due to a dovish outlook from the Federal Reserve, while USD/CAD continues to face pressure. In other news, EUR/GBP remains steady, even with varying inflation and GDP reports. Litecoin shows signs of a bullish trend, and AAVE’s price suggests a potential breakout. The US dollar is losing ground against the Chinese yuan, a move that seems carefully controlled. Since April 2025, the PBoC has been guiding the yuan to a stronger position, creating a clear opportunity for the upcoming weeks. Recent data backs this up, with China’s industrial production for November 2025 rising by 5.6%. This stronger economic situation gives authorities the confidence to allow the currency to strengthen. The official daily fix has dropped by more than 1.5% in the last quarter, showing a significant and deliberate trend.

Trading Strategy and Broader Economic Context

Given this downward pressure, we recommend buying put options on USD/CNH. Focus on strike prices near the critical support levels of 7.05 and 7.0380, which could lead to opportunities if the price moves toward the 7.00 level. However, remember that the central bank prefers a gradual decline, which could limit volatility. One-month implied volatility is currently low at about 4.2%, making options inexpensive yet susceptible to slow price movements. Therefore, considering expiration dates in late January or February 2026 may be wise to navigate any short-term pauses. This trading strategy is bolstered by the Federal Reserve’s dovish stance, which keeps the US dollar weaker overall. The recent cut that brought the US 2-year yield down to 3.50% is a far cry from the aggressive policy seen in 2023 and 2024. This broader weakness of the dollar supports the yuan’s appreciation. Create your live VT Markets account and start trading now.

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