The USD/CNH has extended its decline, breaking below the lower boundary of a descending channel. The currency pair appears on track to reach objectives at the channel’s lower limit, between 7.01/7.00, followed possibly by a 2024 low near 6.97.
A short-term bounce is possible, facing resistance around the 50-DMA near 7.09/7.10. Related content from FXStreet discusses trends in other markets, noting that Chinese crude oil processing grew by 4% year-on-year in November, and the EUR/USD is hovering near its highest level since October. Gold is under pressure due to the delayed US NFP release.
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The US dollar continues to weaken against the Chinese yuan, having broken below a key technical channel. This confirms the bearish trend we have been watching for months and suggests further downside is likely. Data released last week for November 2025 showed China’s industrial production grew by 4.8% year-over-year, beating forecasts and adding fundamental strength to the yuan.
We see the pair heading towards the 7.01/7.00 level in the coming weeks, a target that now seems highly achievable. This view is supported by the recent US inflation report for November 2025, which showed Core CPI falling to a 2.5% annual rate, increasing bets on a Federal Reserve rate cut in the first quarter of 2026. Derivative traders should consider buying puts or establishing bearish positions targeting these lower levels.
Market Dynamics And Currency Movements
While the downward move appears stretched, there are no signs of a reversal yet, meaning any bounce is likely to be temporary. The 50-day moving average near 7.09 should act as strong resistance against any short-term dollar recovery. Selling weekly call options with strike prices above 7.10 could be an effective strategy to capitalize on this resistance.
Looking back, this push towards the 7.00 handle is a significant shift in market dynamics. We should remember the pair spent much of 2023 and 2024 holding firmly above the 7.20 level. Re-testing the low from 2024 near 6.97 is now a distinct possibility before the end of the first quarter of 2026.
