USD/CNH has been sliding as broad US dollar weakness coincides with a stronger-than-expected improvement in China’s external accounts, leaving the pair close to support at its June multi-year low of 6.7581. China’s May trade surplus widened on activity linked to the AI supply chain, with export volumes supported by demand for AI-related goods while imports were lifted by semiconductor purchases.
The trade surplus rose to a four-month high of $105.4bn, as exports increased 19.4% year on year and imports climbed 27.4% year on year, both ahead of consensus expectations. Over the past year, China’s trade surplus totalled $1.17 trillion, underscoring the scale of net trade inflows alongside the currency’s recent firmness.
Drivers Of The USD/CNH Downtrend
Given the sustained downtrend in the USD/CNH, we see opportunities for the coming weeks. The pair is testing its multi-year low around 6.7581, driven by broad weakness in the U.S. dollar and notable strength in the Chinese economy. This downward pressure appears solid, creating a clear trend for traders to follow.
The strength in the yuan is fueled by a massive trade surplus, which recent data confirms is expanding. China’s latest customs report from last week showed semiconductor imports surged by nearly 30% year-over-year in May 2026, feeding a global boom in demand for its AI-related exports. This fundamental strength suggests the yuan’s appreciation is well-supported by actual economic activity.
On the other side of the pair, the U.S. dollar is softening as inflation expectations cool. The May 2026 Consumer Price Index reading came in at 2.8%, prompting markets to price in a more dovish stance from the Federal Reserve. This divergence in economic momentum between the U.S. and China is the primary driver of the currency trend.
Trade Setups And Market Strategy
In response, we are looking at buying USD/CNH put options with expirations in late July and August. This strategy allows us to profit from a continued fall below the 6.7581 support level while strictly defining our maximum risk. The current low volatility in the pair makes the entry price for these options attractive.
For those with a higher risk tolerance, we are also considering initiating short positions in USD/CNH futures. This provides more direct exposure to the downward momentum we anticipate in the near term. We would use a tight stop-loss just above the 6.8000 psychological resistance level.
This setup is reminiscent of the 2017-2018 period, when a combination of strong Chinese growth and a stable U.S. interest rate environment led to a significant and prolonged appreciation of the yuan. The current fundamental drivers, especially within the AI supply chain, suggest this trend has room to run.
