USD\/CNH jumped to 6.8195 after trading as high as 6.7979 earlier in the week. The move was described as overdone, with price action now expected to consolidate intraday between 6.8030 and 6.8185 rather than extend the rally. Earlier guidance had framed the advance as part of a higher 6.7850\/6.8000 range, but momentum later accelerated beyond that view.<\/p>\n
Over a 1\u20133 week horizon, the positive USD stance remains in place. On 22 Jun, with spot at 6.7840, USD was seen as capable of testing 6.8000; after spot was 6.7930 on 24 Jun, a break of 6.8000 was viewed as opening 6.8080 and potentially 6.8200. With the pair reaching 6.8195 quickly and momentum now stronger, there is scope for a push towards 6.8300, while 6.7900 is the support level; the prior day\u2019s strong support was cited at 6.7750.<\/p>\n
We see that the sharp recent rise in USD\/CNH is taking a pause, likely to consolidate in a range between 6.8030 and 6.8185 for now. The surge to 6.8195 was fast, but we believe the underlying positive view on the US dollar remains unchanged. This short-term consolidation presents an opportunity to position for the next move.<\/p>\n
This upward momentum is supported by fundamental economic differences. The People’s Bank of China just cut its one-year loan prime rate by 10 basis points to 3.35% last week to bolster a sluggish economy, as May’s industrial production figures came in below expectations. Meanwhile, the US Federal Reserve is holding interest rates steady, creating a clear policy divergence that favors a stronger dollar.<\/p>\n
For traders, this outlook suggests buying call options on USD\/CNH with strike prices approaching our target of 6.8300 could be a viable strategy. Given the strong support level identified at 6.7900, selling put options with a strike at or slightly below this level might also be considered. This would allow us to collect premium based on the view that the downside is well-protected.<\/p>\n
Considering the recent spike has likely increased implied volatility, making options more expensive, a debit call spread could be more cost-effective. We could look at buying a 6.8100 strike call while simultaneously selling a 6.8300 strike call. This caps potential profit but significantly lowers the entry cost for a bullish position.<\/p>\n
Historically, the 6.80-6.83 range has served as a significant pivot point for the currency pair, particularly during periods of economic uncertainty in 2022 and 2023. The current surge in momentum toward this zone suggests we may be retesting these critical levels. We will maintain our positive USD view as long as the pair holds above the 6.7900 support level.<\/p>\n\n\n\n