USD/CNH Forecast: New Year, Same Yu-an Strength
Chinese Yuan Key Points
- China senses an opportunity to boost the yuan’s profile given the US dollar’s recent struggles.
- The yuan still accounts for a miniscule 2% of FX reserves, so any progress toward dethroning the US dollar will likely be measured in decades, rather than months or years
- USD/CNH has been trending consistently lower within a bearish channel since the start of November, falling 2500 pips from near 7.14 to closer to 6.88 now – what are the levels to watch next?
Chinese President Xi Jinping started February out with a bang, outlining plans to turn the renminbi into a global reserve currency. In a journal, he asserted that China will establish “a strong currency widely used in international trade and foreign exchange,” with a “powerful central bank” and the ability to attract investment and influence global pricing.
Whether China will achieve this ambitious goal remains to be seen, especially given the export-reliant nature of its economy and tight capital controls, but it’s clear that the country senses an opportunity given the US dollar’s recent struggles. As the chart below shows, the yuan still accounts for a miniscule 2% of FX reserves, so any progress toward dethroning the US dollar will likely be measured in decades, rather than months or years:
Source: LSEG Datastream
Separately, Chinese regulators advised banks to reduce their allocations to US Treasury bonds last week due to concern over concentration risk and market volatility; at the margin, this reduces flows that were supporting the greenback, though again, the immediate market impact is likely to remain small. Regardless, between China’s currency aspirations, banking reserve guidance, and the PBOC’s gradual adjustment to the exchange rate target, the trend of yuan appreciation may still be in the early innings.
Chinese Yuan Technical Analysis: USD/CNH Daily Chart
Source: Tradingview, StoneX
Most Chinese traders are away from their desks for the New Year celebration this week, but that hasn’t stopped the yuan from rising. As the chart of the Hong-Kong traded version of the yuan (CNH) above shows, USD/CNH has been trending consistently lower within a bearish channel since the start of November, falling 2500 pips from near 7.14 to closer to 6.88 now.
Readers should be cautious about relying too heavily on technical analysis with a currency pair that is closely managed by a central bank, but the path of least resistance remains clearly to the downside at this point, with little in the way of previous support until the March 2023 lows in the lower 6.80s. Only a break above the bearish channel and near-term moving averages in the 6.90 zone would erase the near-term bearish bias.
-- Written by Matt Weller, Global Head of Research
Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Contracts for Difference (CFDs) are not available to US residents.
FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of StoneX Group Inc.
Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.
© FOREX.COM 2026