The US Dollar may test the 7.1700 level against the Chinese Yuan, but it’s unlikely to break below this point. Although there is a slight increase in downward momentum, a drop past 7.1700 is not anticipated. Analysts say that for the US Dollar to keep falling, it must first close below 7.1700. The chances of this happening grow if the 7.1950 level acts as strong resistance.

Immediate 24-Hour View

In the next 24 hours, the US Dollar hit a low of 7.1758 but didn’t show significant downward pressure. Resistance levels above are at 7.1850 and 7.1900, which could be areas where prices stabilize. Looking ahead to 1-3 weeks, we expect the US Dollar to trade within a range of 7.1700 to 7.2100. If it closes below 7.1700, the next target will be 7.1580, suggesting further decline. This analysis highlights the importance of tracking momentum and closing prices, especially if they dip below key support and resistance levels, to predict future movements. Currently, the US Dollar is expected to trade in a range against the Chinese Yuan, likely between 7.1700 and 7.2100. For traders using derivatives, this situation might favor low-volatility strategies like selling straddles or strangles, as big price fluctuations beyond this range are not expected soon.

US Dollar and Interest Rates

This view gains support from the recent US inflation figures, which were slightly lower than expected at 2.9%. This data strengthens the belief that the Federal Reserve will likely keep interest rates steady through the year, limiting the potential rise of the US Dollar above the 7.2100 level. On the other hand, China recently reported an unexpected increase in industrial output for July 2025, indicating some economic improvement. The People’s Bank of China is also managing its currency closely, preventing it from dropping below key levels, which is why the 7.1700 support level looks strong. This solid defense of the Yuan makes a significant drop in the Dollar unlikely for now. Looking back to 2023 and 2024, aggressive rate hikes by the US Fed caused the Dollar to surge against the Yuan. The situation in August 2025 is quite different, as both countries show a more balanced approach. This historical change suggests a more stable, range-bound market rather than a strong trend. The primary strategy is to trade within this expected range, possibly using options like an iron condor around these levels. However, be on alert for a daily close below the 7.1700 support. If that occurs, it may be time to change strategies, such as buying put options to bet on a further drop toward the 7.1580 target. Create your live VT Markets account and start trading now.

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