USD/CNH has edged higher in step with a broader US dollar rebound and firmer US Treasury yields, though the move has been contained. The pair was last seen around 6.7225, with mild bearish momentum still evident on the daily chart. RSI is showing early signs of turning up from oversold conditions, leaving room for a modest rebound. Resistance is seen at 6.7410, the 21 DMA, and then 6.75, while support sits at 6.72 and 6.70.
Beyond the near-term macro drivers, renewed US pressure on Iran adds uncertainty through China’s position as a major buyer of Iranian oil. The immediate FX impact is expected to stay limited if measures avoid directly targeting major Chinese financial institutions, but any escalation in secondary sanctions against Chinese firms or banks could increase two-way volatility in the RMB. Separately, the PBoC is signalling a preference for a measured appreciation path, reinforced by a sizeable fix-versus-expectation gap that points to caution over allowing RMB strength to accelerate.
—Trading Recommendations Amid USD Rebound and Yield Firming
We advise derivative traders to prepare for increased two-way volatility in the USD/CNH pair over the coming weeks as the US Dollar rebounds. With the pair recently hovering around the 6.7225 level, we recommend establishing long positions near the strong support zone of 6.70 to 6.72. This strategy aligns with the broader rise in US Treasury yields, which recently saw the 10-year yield firming up near 4.1%, providing solid underlying support for the greenback.
To manage risk, traders should target short-term profit-taking near the immediate resistance band of 6.7410 to 6.7500. We anticipate a modest technical rebound because the daily Relative Strength Index (RSI) is showing tentative signs of recovery from oversold territory. However, the upside will likely remain capped as the People’s Bank of China continues to signal its preference for a gradual, controlled appreciation of the Renminbi.
—Geopolitical Risks and Options Strategies
Furthermore, we must closely monitor geopolitical developments, particularly around Iranian crude exports, which recently reached a multi-year high of approximately 1.5 million barrels per day. Any escalation in US secondary sanctions targeting Chinese financial institutions involved in these transactions could trigger sudden spikes in volatility. For option traders, this environment makes buying short-dated straddles or strangle options highly attractive to capture sudden, sharp swings in either direction.
