The Chinese yuan traded at 7.34841 against the U.S. dollar (Symbol: USDCNH) on Thursday, reflecting stability alongside mounting speculation about easing measures from the People’s Bank of China (PBOC). The currency pair has been trading near a 16-month low, driven by a mix of domestic liquidity considerations and global economic shifts.
USDCNH Steadies Near Lows Before Policy Changes
Overnight, softer U.S. inflation data weakened the dollar, offering brief respite for the yuan. However, concerns over U.S. tariff policies under President-elect Donald Trump and rising domestic inflation have capped gains for the yuan.
Analysts suggest the PBOC may announce a reserve requirement ratio (RRR) cut ahead of the Spring Festival holiday starting 28 January 2025 to alleviate liquidity constraints.
Technical Analysis: U.S Dollar vs Chinese Yuan
Picture: USDCNH consolidates at 7.34841, with resistance at 7.35166 and mild bullish momentum fading, as seen on the VT Markets app.
From a technical standpoint, USDCNH is consolidating near 7.34841 with minimal movement, reflecting a flat trend (+0.02%). The price remains range-bound between support at 7.33426 and resistance at 7.35166, showing limited momentum. The moving averages (5, 10, and 30-period) are closely aligned, indicating indecision in the market.
While the MACD histogram displays mild bullish momentum with green bars, the MACD and signal lines are converging, suggesting the possibility of consolidation or a reversal.
A break above 7.35166 could push the pair higher towards 7.36, while a drop below 7.33426 might signal increased selling pressure.
What to Expect Next for USDCNH
Trajectory of the Chinese yuan remains highly dependent on movements around the policy surrounding the U.S. dollar. Other than potential liquidity measures from the PBOC, dollar sentiment being influenced by Federal Reserve rate expectations and inflation data will also play a critical role. Clarity on potential tariffs from the Trump administration could create additional volatility for USDCNH.
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For now, USDCNH is likely to remain range-bound near its current levels, with 7.33426 serving as key intraday support and 7.35166 acting as a critical resistance. Further central bank decisions or unexpected global events could shift this balance, but without major news, steady movements are likely.
