The US Dollar (USD) may weaken to 7.2430 against the Chinese Yuan (CNH) before stabilising. Observations indicate uncertainty regarding whether it will reach 7.2150.
Recently, the USD closed at 7.3471, marking a 0.76% increase. While there is potential for further growth, it’s unlikely to surpass 7.3800 given the current overbought conditions.
Weekly Fluctuations
In the past week, the USD fluctuated between 7.3485 and 7.2394. To maintain momentum, it must remain above 7.2750, although breaking through 7.3800 remains uncertain.
Given the technical conditions we’re observing, the US Dollar remains vulnerable to modest downward corrections, inching closer to the lower boundary of its recent range. The possibility of revisiting the 7.2430 level is not out of the question, and the debate around whether it could continue dipping towards 7.2150 underlines a broader hesitation in directional conviction. We see resistance above, especially near the 7.3800 area, where upward momentum has repeatedly flagged.
The past week’s movement, fluctuating between 7.3485 and 7.2394, showed a market grappling with relatively tight ranges and short-lived moves in either direction. Traders relying on trend continuation would need to stay alert, particularly if the price hovers above 7.2750. That level now acts as something of a line in the sand: price action above it allows for minor gains, while slipping below it would open the door to renewed downward moves.
Market Conditions and Strategies
Lingering overbought signals, as highlighted after the uptick to 7.3471, suggest limited appetite for fresh longs beyond current levels. Conditions like these often trigger position trimming rather than aggressive new entries, as those holding existing exposures may start prioritising protection of recent gains over stretching for marginal returns. In such an environment, momentum tends to stall and false breakouts become more common, adding to the difficulty in constructing a reliable directional bet.
What’s worth watching in the coming sessions is whether short-term support around 7.2750 can hold under pressure. If we see a clean break below that point, it could drive an uptick in volatility, as stops and conditional orders below that range could be triggered. On the other hand, a rebound off that level would reinforce the broader consolidation framework that’s been unfolding.
During range-bound conditions, one strategy we lean on involves trading around the edges, watching for exhaustion at known levels and adjusting size accordingly. This means reducing reliance on trend-following indicators and instead focusing more on momentum divergence and volume shifts. With volatility compressed, sharper moves are often met with sharp reversals, so rapid positioning becomes essential.
Additionally, the inability to break decisively above 7.3800 should serve as a warning against chasing long setups too aggressively at the upper end of the band. Overextending exposure into stretched territory can leave positions exposed when mean-reversion takes hold, which tends to be abrupt when order books thin out.
Heading into the week ahead, risk should remain closely managed, adjustments made incrementally, and stops tightened as price approaches boundaries identified by historical congestion. Intraday setups may offer better reward profiles than broader swing trades, particularly given the choppy nature of the last week’s price behaviour. This way, we stay nimble and responsive without anchoring ourselves to one directional view prematurely.
