USD/CNH Trading Expectations

The US Dollar (USD) is expected to trade between 6.9620 and 6.9820 in the short term. Analysts from UOB Group, Quek Ser Leang and Peter Chia, believe the USD is neutral but may fluctuate in a lower range of 6.9520 to 6.9900 over a longer period. In the last 24 hours, the USD had a softer tone and traded between 6.9630 and 6.9750, which was narrower than expected. There hasn’t been a notable increase in downward momentum, so we expect the USD to continue trading within the 6.9620 to 6.9820 range today. Since January 8, the outlook for the USD over the next 1 to 3 weeks has been neutral, pegging it around 6.9900. Analysts predicted a range of 6.9660 to 7.0160. Although it dipped below 6.9660, the downward momentum only slightly increased. The view remains neutral, now with an anticipated lower range of 6.9520 to 6.9900. Comparing to early 2025, we expected a neutral stance on USD/CNH, trading tightly around 6.9520 to 6.9900. However, the market has changed significantly, with the pair currently near 7.2850. This shift from last year’s stability calls for a new perspective. The CNH’s weakness is partly due to December 2025 data showing a dip in China’s Caixin Manufacturing PMI to 49.8, indicating a small contraction. This suggests that the People’s Bank of China will likely continue its easing measures to support the economy. Meanwhile, the US continues to face high inflation, as the December 2025 Core CPI report showed an annualized rate of 3.5%, well above the Federal Reserve’s target.

Trading Strategies Amid Policy Divergence

The difference in policies, with the Fed keeping rates steady and the PBOC easing, is likely to support a strong USD against the yuan. Since the pair is holding above the important 7.2500 level, the downside appears limited in the upcoming weeks. The quiet period around the Lunar New Year may reduce volatility, but the overall trend is still upward. For traders, this situation may present opportunities to sell out-of-the-money puts on USD/CNH to collect premiums. One strategy could be selling February puts with a strike price around 7.2000, betting that the pair will stay well above this level. This strategy benefits from the upward trend and potential decreases in volatility. Alternatively, for those looking for a position with defined risk, long call spreads might be a good option. Buying a March 7.3000 call while selling a 7.3500 call would position traders for a gradual rise towards the heights seen in late 2025, allowing for upside participation while keeping initial costs reasonable. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now