The US Dollar (USD) against the Chinese Yuan (CNH) is expected to trade between 7.0620 and 7.0740. This view is according to FX analysts from UOB Group, who note a negative outlook for the USD in the longer term, with the next key level being 7.0400.
In the 24-hour view, momentum indicators remain flat. It is anticipated that USD will continue to trade within the range of 7.0620 to 7.0740, having closed unchanged at 7.0715 previously with a narrower trading range of 7.0659 to 7.0726.
Continued Negative Outlook
In the 1-3 weeks view, the negative position on USD remains unchanged. This is viable as long as the resistance level of 7.0770 is not breached. Despite not moving further downwards recently, analysts maintain their stance on USD’s potential movement towards 7.0400.
The dollar’s movement is currently contained, and we expect it to trade sideways between 7.0620 and 7.0740. This suggests low near-term volatility, making it a good time to consider strategies like selling straddles that profit from range-bound conditions. Traders should watch these levels closely for a potential breakout.
Despite the current calm, our underlying view for the next one to three weeks remains negative for the US dollar, with an eye on the 7.0400 support level. This perspective is reinforced by the latest US inflation figures from November 2025, which came in below expectations at 2.8%, easing pressure on the Federal Reserve. Meanwhile, China’s industrial output has shown surprising resilience, lending strength to the yuan.
Trading Strategies and Risks
We will maintain this negative stance as long as the dollar stays below the strong resistance at 7.0770. A decisive break above this level would signal that the downward pressure has faded, requiring a reassessment of short positions. Derivative traders might use this 7.0770 level to structure their risk, for example, by setting the strike price for call options used as a hedge against a bearish bet.
Looking back at similar periods of consolidation, such as what we saw in the third quarter of 2024, low volatility often precedes a significant policy-driven move. The market is currently pricing in a steady Federal Reserve for their upcoming meeting, but any surprise could trigger a sharp break from the current range. Therefore, while range-trading strategies are attractive now, traders should be prepared for a potential spike in volatility.
