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The Chinese yuan gained ground on Friday as improved sentiment in domestic markets, and a softer US dollar offered support. With traders balancing expectations around US jobs data and monitoring signals from Beijing, the currency remains at the centre of attention in global forex markets.
Dollar weakness lifts yuan momentum
The Chinese yuan posted modest gains on Friday in both onshore and offshore trading, supported by a rebound in domestic equities and a softer US dollar.
According to market observers, fading regulatory concerns helped lift Chinese stocks, which in turn created positive momentum for regional assets.
The People’s Bank of China (PBoC) also contributed to the yuan’s strength by setting the daily reference rate at 7.1064 – well above market forecasts. The offshore yuan (USD/CNH) mirrored this move, trading near 7.1334 by midday in Asia.
Meanwhile, the broader dollar weakened ahead of the highly anticipated US non-farm payrolls (NFP) release later in the day, a report that could heavily influence expectations for Federal Reserve policy.
Technical analysis
The USD/CNH pair is currently trading around 7.13, slipping 0.06% and extending the gradual decline that began after April’s peak near 7.43.
The currency pair remains close to the 7.11 support area, maintaining a steady downtrend. Short-term moving averages (5, 10, 30) are aligned bearishly, pointing to sustained selling pressure. In addition, the MACD remains negative, underlining continued downside momentum.
Picture: USDCNH-ECN trades at 7.1316, edging down 0.06% from its recent level, with support near 7.11 as seen on the VT Markets app.
A clear break below 7.11 could expose the next support level around 7.05. On the upside, initial resistance is located at 7.20, followed by 7.25 – levels that would need to be reclaimed for any shift back towards bullish sentiment.
For now, the technical setup stays bearish, with traders remaining alert to policy signals from Beijing as well as upcoming US economic data that may influence capital flows and yuan stability.
Cautious outlook
Should the NFP report show weaker-than-expected job growth, the US dollar may come under additional pressure, opening the door for USD/CNH to test the 7.10 area.
Conversely, a strong or hawkish outcome from the US labour data could stall further yuan appreciation, particularly against a backdrop of ongoing macroeconomic uncertainty in China.
In this case, the currency pair may consolidate within its current range as investors reassess both Federal Reserve policy direction and China’s domestic economic resilience.
Market participants will also be watching closely for further PBoC guidance, as the central bank’s daily fixings remain a critical driver of sentiment.
Combined with signals from Chinese authorities on growth measures and fiscal support, these factors will likely determine whether the yuan can sustain its current strength or face renewed selling pressure in the weeks ahead.
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