Key Points:
- USDCNH (Offshore yuan) hits a two-month low of 7.239 against the dollar.
- The yuan briefly recovers, closing at 7.3267 per dollar, up 0.40%.
- The US-China trade war continues to impact the yuan, as expectations rise for further Chinese policy adjustments.
Offshore Yuan Hits Two-Month Low Amid Trade Tensions
The offshore yuan (USDCNH) sank to a two-month low of 7.239 against the dollar, reflecting growing market concerns amid escalating trade tensions between the US and China. The currency’s decline came in the wake of US President Trump’s new tariffs on Chinese imports, signaling a worsening trade war.
Although the yuan recovered slightly, closing at 7.3267, it remained under significant pressure due to fears that the trade conflict could spill over into broader economic impacts.
Pressure on China and Market Expectations
The recent drop in the yuan reflects market expectations that China may implement further policy easing, such as cutting borrowing costs or reserve requirements, to counter the impact of the ongoing trade war. These moves are expected to help cushion the economy, but the market is bracing for more volatility as China responds to the tariffs.
Technical Outlook
Picture: USDCNH tests resistance at 7.33095 after gaining momentum from 7.239, as seen on the VT Markets app.
USDCNH increased by 0.40%, closing at 7.32674 after opening at 7.2976. The pair saw a steady rise, reaching a high of 7.33095 before retracing slightly to close near 7.32674.
The moving averages (MA 5,10,30) reflect bullish momentum, with the shorter-term moving averages crossing above the longer-term ones. This indicates a potential for continued upward movement. The MACD (12,26,9) confirms this trend, showing a positive histogram as the MACD line (blue) moves above the signal line (yellow).
USDCNH is experiencing upward pressure, with the price pushing higher above key resistance levels. A sustained move above 7.33095 could signal further gains, while a break below 7.239 might signal a potential pullback.
Despite a recovery in the yuan’s price after hitting the two-month low, concerns about China’s economic outlook and the US-China trade standoff continue to create uncertainty in the currency market.
