Insights 
VT 
The offshore Chinese Yuan (CNH) held steady around 7.14 against the US Dollar (USD) on Monday. Market caution prevailed ahead of crucial data release, with official Purchasing Managers Indexes (PMIs) scheduled for Tuesday.
These PMI figures will shed light on China’s manufacturing and services sectors amid ongoing economic challenges. August’s official NBS Manufacturing PMI slightly improved to 49.4 but stayed in contraction for the fifth month. New orders marginally increased to 49.5, with exports dwindling at 47.2, indicating continuing global demand weakness.
Growth In Non-Manufacturing Sector
In non-manufacturing, the NBS index showed mild growth at 50.3 with varied survey results. The RatingDog Services PMI surged to 53 in August, its highest since May 2024, driven by recovery in tourism and exports.
RatingDog Manufacturing PMI rose to 50.5, returning to expansion following domestic order growth. Despite improvement, employment remains weak. Forecasts for September suggest NBS at 49.6 and RatingDog at 50.3, with market focus on momentum changes amidst sluggish economic indicators.
USD/CNH faced resistance around 7.1500, with potential upward targets at 7.1700 and 7.1900. Downside support is at 7.1355 and further at 7.1208, marked by the 100-period SMA on the 4-hour chart.
With the offshore Yuan (CNH) holding near 7.31 against the Dollar, we are watching the market digest this week’s key economic data. The September NBS Manufacturing PMI, released on Tuesday, came in at 49.5, missing the forecast of 49.6 and marking the sixth straight month of contraction. This confirms that factory activity in large state-owned enterprises remains fragile.
RatingDog PMI vs NBS PMI
However, the RatingDog Manufacturing PMI painted a different picture, rising to 50.8 and beating expectations of 50.3. This divergence suggests that smaller, export-oriented firms are finding some footing, even as the broader domestic economy struggles. This split view reinforces the uncertainty that has defined the Chinese economy over the past year.
This persistent weakness is anchored in the property sector, where investment continued its decline, falling over 12% year-over-year through August 2025. This follows a similar trend we saw throughout 2024, showing that government stimulus efforts have yet to revive domestic confidence. This sluggish internal demand puts a cap on any significant economic recovery.
From a technical standpoint, the USD/CNH pair is currently facing stiff resistance at the 7.3200 level. A decisive break above this could signal a move towards the highs we saw earlier this year near 7.3500. On the downside, initial support lies around the 50-day moving average at 7.2850.
Given the conflicting economic signals, derivative traders may see an opportunity in volatility rather than direction. With implied volatility on USD/CNH options still below the peaks of 2022, strategies like buying straddles could be attractive to capture a sharp move in either direction. This approach benefits from the current uncertainty without betting on a specific outcome.
We must also consider the US Dollar’s role, as the Federal Reserve’s policy remains a key driver. Recent US inflation data has cooled, leading to market chatter that the Fed may signal its first rate cut by early 2026. Any confirmed dovish shift from the US could put pressure on the dollar, potentially limiting the upside for the USD/CNH pair even if China’s data remains weak.
