UOB said USD/CNH retains a soft bias, with the US dollar able to probe support at 6.7420 over the next 24 hours, though follow-through below that level is still viewed as unlikely. The pair traded in a narrow 6.7450–6.7500 band and ended at 6.7482, up 0.01%, leaving near-term resistance at 6.7550. Price action was subdued, but the directional tone remains mildly negative.
Over a 1–3 week horizon, the bank continues to look for a gradual drift towards 6.7300 provided 6.7640 holds as resistance; its latest update referenced 03 Aug with spot at 6.7490 and flagged limited evidence of accelerating downside momentum. On a 1–3 month view, it sees tentative upward momentum developing, but a sustained recovery would require a break above the 21-week EMA at 6.8430.
Derivative Opportunities Amidst Short-Term Softness
We see a soft underlying tone for the USD/CNH, presenting an immediate opportunity for derivative traders to target short-term downside moves toward 6.7420. Since a sustained break below this floor is highly unlikely in the coming days, traders can write short-term put options at or below 6.7400 to safely collect premium. This cautious optimism for the yuan is backed by China’s resilient trade data, with exports recently growing by 8.6% year-on-year to help the currency hold its ground.
Medium- and Long-Term Trading Strategies and Macro Risks
Looking ahead over the next one to three weeks, we expect a gradual slide toward 6.7300, as long as the strong resistance level at 6.7640 is not breached. To capitalize on this slow downward drift, we recommend buying near-the-money put options with late-August expiries. This positioning is supported by historical seasonal trends where the yuan often experiences supportive corporate inflows heading into the latter half of the third quarter.
Over a longer one-to-three-month horizon, we see tentative signs of upward momentum that would require a clean break above the 21-week exponential moving average at 6.8430 to confirm a real recovery. Derivative traders should protect against this potential reversal by holding out-of-the-money USD/CNH call options as a macro hedge. This protective stance is vital given the ongoing yield divergence, especially with the People’s Bank of China keeping its one-year loan prime rate steady at 3.35% to support domestic growth.
