CNH to USD Under Pressure as Policy Signals Gradual RMB Strength

The Chinese yuan continues to gain ground against the dollar, with USD/CNH trading in a pressured environment near recent lows. Market observers note that this weakness stems from a combination of factors: persistent broad-based USD softness and deliberate central bank signaling through the daily USD/CNY fixing mechanism, which has been set at lower levels to facilitate a controlled appreciation path for the RMB.

Policy Steering via Fixing Mechanism

The USD/CNY fix reached 7.0638 last Friday, marking the lowest level in 14 months. This pattern has persisted consistently since April 2025, suggesting policymakers are pursuing a strategic approach to strengthen the RMB while avoiding disruptive market moves.

An interesting observation from market participants: both spot rates and Bloomberg consensus forecasts for the daily fix have been trading below actual fix levels for two consecutive weeks. This discrepancy raises questions about whether authorities will maintain the current pace of downward fix adjustments or potentially moderate the trajectory. A continuation of aggressive fixing could amplify downside pressure on USD/CNH, while a slowdown might allow for consolidation in the spot market.

Technical Picture: Early Warning Signs

From a technical standpoint, daily momentum has turned mildly bearish, with the Relative Strength Index (RSI) approaching oversold territory—a condition that often precedes reversals or significant moves.

The pair was last quoted around 7.0427, sitting precariously near the 7.0380 support level. A breach below this floor could open the door to further declines, potentially pushing USD/CNH toward the 7.00 handle. Meanwhile, resistance is anchored at 7.08, aligned with the 21-day moving average (21 DMA). Any sustained break below 7.0380 coupled with a fresh round of CNY strengthening or renewed USD weakness would likely trigger additional selling pressure on the pair.