USD/CNH Trading Expectations
The US Dollar (USD) is anticipated to trade within a range of 6.9620 to 6.9820 in the short term. Analysts from UOB Group, Quek Ser Leang and Peter Chia, note that while the USD remains neutral, it is now predicted to fluctuate in a lower range of 6.9520 to 6.9900 over a longer period.
In the previous 24 hours, the USD showed a softer tone but stayed in a range narrower than anticipated, between 6.9630 and 6.9750. There has been no distinct increase in downward momentum, so the expectation remains that the USD will continue to trade within the 6.9620 and 6.9820 range today.
Over a 1-to-3 week period, the USD view has been neutral since January 8, with a price point of 6.9900. The expectations were for the USD to trade between 6.9660 and 7.0160. Despite a dip below 6.9660, the downward momentum saw only a slight increase. The view remains neutral, with expectations now set for a lower trading range of 6.9520 to 6.9900.
Looking back to this time in early 2025, we saw a neutral stance with USD/CNH expected to trade in a tight range around 6.9520 to 6.9900. The market is now in a completely different state, with the pair currently trading near 7.2850. This significant shift away from the stability of last year requires a new approach.
The weakness in the CNH is partly driven by recent data from late 2025, which showed China’s Caixin Manufacturing PMI for December slipping to 49.8, indicating a slight contraction. This has reinforced expectations that the People’s Bank of China will continue its easing policy to support the economy. In contrast, the US is still dealing with persistent inflation, as the December 2025 Core CPI report came in at an annualized 3.5%, well above the Federal Reserve’s target.
Trading Strategies Amid Policy Divergence
This policy divergence, with the Fed holding rates firm and the PBOC in an easing cycle, should continue to support a strong dollar against the yuan. With the pair holding above the key 7.2500 level, we see limited downside in the coming weeks. The quiet period around the upcoming Lunar New Year may cap volatility, but the underlying trend remains upward.
For traders, this environment suggests selling out-of-the-money puts on USD/CNH could be an effective strategy to collect premium. One could consider selling February puts with a strike price around 7.2000, betting that the pair will remain well-supported above this level. This strategy benefits from both the upward trend and any potential decay in volatility.
Alternatively, for those seeking a position with defined risk, long call spreads could be advantageous. Buying a March 7.3000 call and selling a 7.3500 call would position for a gradual move higher toward the peaks we saw in late 2025. This allows participation in further upside while capping the initial cost of the trade.
