US-China trade talks have stirred cautious optimism, but a lack of concrete policy shifts is keeping markets on alert. This analysis looks at how the yuan is reacting to headline-driven sentiment, key technical signals, and what might guide the next move.

Cautious optimism as US-China trade talks resume

The Chinese yuan traded within a narrow band on Wednesday, with investor sentiment subdued amid cautious optimism over reported progress in US-China trade discussions.

By 2:53 AM GMT, the onshore yuan was little changed, holding near 7.1872 against the US dollar, while the offshore rate hovered around 7.1873 — a modest 0.04% increase.

Despite upbeat headlines from Tuesday’s dialogue, markets appeared hesitant. The initial optimism seemed largely priced in, as traders awaited firm policy measures to confirm a shift in sentiment.

Officials from both nations announced a tentative framework aimed at reviving the Geneva trade agreement and easing restrictions on China’s rare earth exports.

However, the absence of concrete details limited investor risk appetite, especially among forex participants wary of prolonged geopolitical uncertainty.

The People’s Bank of China (PBoC) set the daily reference rate at 7.1815 — its firmest fixing since 2 April — allowing for a trading range between 7.0382 and 7.3251, within the usual 2% band.

Analysts at Citi noted that the central bank’s continued focus on maintaining the midpoint near the 7.2 level likely reflects Beijing’s intent to reinforce currency stability in the face of global headwinds.

While market sentiment has edged higher, Singapore-based DBS cautioned that the market may have already absorbed most of the positive momentum from the latest US-China developments.

Without clear commitments regarding tariff reductions or a timeline for easing rare earth restrictions, they argue, the yuan is unlikely to experience any significant directional shift in the near term.

Technical analysis: USD/CNH stalls as traders await direction

The USD/CNH currency pair is currently consolidating near the 7.18675 mark, following a volatile intraday session.

After reaching a low of 7.17764, the pair rebounded towards resistance at 7.19421 before being rejected, indicating hesitation among traders.

Since that move, price action has remained confined within a narrow range between 7.18182 and 7.18943 — reflecting a broader market pause ahead of key macroeconomic triggers.

Momentum indicators support this outlook: the MACD histogram is narrowing, and the MACD line is flattening just above the signal line, pointing to waning bullish momentum.

Markets await a breakout from technical standoff

Additionally, short-term moving averages (5- and 10-period) are converging towards the 30-period average, signalling a potential equilibrium phase.

The pair currently trades just below minor resistance (7.188–7.190). A clear break above 7.19421 could pave the way for a push towards the 7.20 psychological barrier.

On the downside, failure to maintain current levels might trigger a retest of the 7.177 support zone.

Unless there is a decisive update regarding US-China tariffs or rare earth export policies, traders are likely to remain cautious.

As a result, the yuan’s price movement will continue to hinge on central bank guidance and geopolitical headlines in the sessions ahead.

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