The USD/CNH is expected to stay neutral, trading between 6.9660 and 7.0160, according to analysts at UOB Group. Last Friday, the USD was predicted to range from 6.9740 to 6.9900 and closed at 6.9777, a slight drop of 0.07%. The overall tone has weakened a bit, shifting the trading range to 6.9700/6.9860 instead of a further decline. For the next one to three weeks, analysts believe that the USD will continue to trade within this range. This prediction was first mentioned on January 8, when the spot position was at 6.9900. The FXStreet Insights Team compiles these evaluations, offering expert market observations from various sources.

Past Outlook Overview

Looking back to early 2025, the outlook for the dollar against the yuan was neutral, with expectations for a tight trading range between 6.9660 and 7.0160. This low-volatility period allowed for effective range-bound strategies. However, market conditions changed considerably over the past year. The range eventually broke as worries about China’s property sector and weak domestic demand caused the yuan to weaken throughout 2025. The pair climbed steadily, exceeding the previously expected resistance level of 7.0160. This highlights how neutral periods can lead to significant trends. Now in January 2026, the situation is more uncertain, presenting different opportunities. Recent data shows China’s exports grew by 2.3% in December, surpassing forecasts and suggesting some economic stability, which could support the yuan. In contrast, the latest US inflation figures released last week were at a stubborn 3.4%, putting pressure on the Federal Reserve to maintain a tough stance.

Current Market Strategies

This mixed data indicates that implied volatility in USD/CNH options may be undervalued. Traders might consider buying volatility through strategies like long straddles or strangles. These positions would benefit from a significant price movement in either direction, which is increasingly likely. For those with a directional bias, options can offer a defined-risk entry. If you think China’s improving trade balance will eventually strengthen the yuan, buying USD/CNH put options is a more efficient strategy than directly shorting the spot market. This protects you from the risk of an unexpected dollar rally due to strong US data. Given the ongoing tug-of-war between these economic forces, a new, higher trading range seems likely in the coming weeks. Selling out-of-the-money puts and calls through an iron condor could be an effective way to collect premium. This strategy profits if the pair moves less than the current market expectations. Create your live VT Markets account and start trading now.

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