Insights 
VT 
Key Takeaways
- USD/CNH surges to 7.1782 before retreating to 7.1776
- China’s Q2 GDP better than expected, but momentum still weak
- PBOC sets firmer fix, calming markets amid stimulus hopes
- Politburo meeting and U.S. CPI in focus for next market move
China’s yuan slipped slightly against the dollar on Tuesday despite a stronger-than-expected GDP report, with USD/CNH rising as high as 7.1782 before settling near 7.1776. The modest move upward reflects the market’s cautious stance following a mixed slate of economic data and persistent pressure for Beijing to enact further stimulus.
While second-quarter GDP figures beat forecasts, indicating resilience in external trade despite U.S. tariffs. China’s economic engine is still sputtering, and without stronger household support and policy action, the recovery may lose traction in H2.
Technical Analysis
USDCNH recently rallied to ~7.178 after bouncing above the 7.170–7.172 price cluster. The 5‑, 10‑, and 30‑period MAs have lifted in alignment, indicating bullish short-term momentum. MACD is positive with histogram expanding, suggesting sustained upside pressure
Picture: Bullish momentum building; eyes on breakout above 7.180, as seen on the VT Markets app
Traders should watch for a break and hold above 7.180, which could confirm further extension toward the 7.190–7.200 range. Conversely, support at 7.172–7.170 must hold, as a drop below there may risk a re-test of the 7.165–7.168 zone.
PBOC Fix Sends a Message
Ahead of the market open, the People’s Bank of China (PBOC) fixed the yuan at 7.1498, a notable 260 pips firmer than Reuters estimates. This move appears calibrated to anchor expectations and pre-empt overreaction to soft underlying data.
The fix also reinforces the idea that Chinese authorities want to prevent runaway depreciation, even as economic fundamentals point to looser monetary conditions ahead. The yuan remains permitted to trade within a 2% band of the daily midpoint.
This controlled flexibility has helped the onshore yuan (USDCNY) hold steady around 7.1733, while the offshore yuan (USDCNH) has drifted only slightly—down 0.04% to 7.1759 at last check.
Markets Look to Politburo and Powell
With the Q2 data out of the way, trader focus is now locked on the upcoming Politburo meeting, expected to define the economic playbook for the rest of 2025. This meeting will likely be dominated by the property sector, where recent housing data and media leaks suggest targeted stimulus measures may be in the works.
Meanwhile, U.S. CPI figures due later today could shift the balance for USD/CNH. A hotter-than-expected print may boost the dollar further, particularly if it re-ignites expectations for a delayed Fed pivot or even another rate hike this year. Traders are now pricing in ~50 bps of cuts by December, but this could change swiftly depending on the inflation trajectory.
The yuan has proven remarkably stable in recent weeks despite softening fundamentals and geopolitical tensions, thanks to tight policy control and measured FX interventions. However, today’s breakout in USD/CNH signals that patience may be wearing thin.
Unless China unveils meaningful fiscal or structural measures in the weeks ahead, the yuan may face renewed depreciation pressure—especially if the Fed maintains a hawkish stance.
