Insights 
USD/CNH continues to face challenges after not surpassing the 50-DMA level. The pair could encounter further downside pressures if the support at 7.18 fails to hold.
Recent market actions saw USD/CNH drop below March’s lows, leading to a pullback towards the 7.18 level. Although there was a short-term recovery, the pair has not overtaken the resistance at 7.27/7.28.
Potential Decline and Target Levels
If the pair’s brief uptick halts near this resistance, a further decline might occur. Should the 7.18 support level break, potential targets include 7.14 and the 7.11/7.10 range.
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Market Observations and Technical Levels
The recent downward movement in USD/CNH has raised eyebrows, particularly as the pair failed once again to push through the 50-day moving average. This technical level has acted like a ceiling for several weeks, and the inability to clear it doesn’t inspire confidence for those on the upside. The drop beneath the March lows wasn’t unexpected, but it does confirm a near-term loss of momentum. After sliding down to test the 7.18 level—a level we’ve been watching closely—the market did attempt to bounce.
That rebound, although modest, came up short before striking the overhead resistance clustered around 7.27 to 7.28. This resistance band lines up not just with prior peaks, but also with a compressed price zone that has stalled progress throughout April. The price appears to be consolidating just under that, which—in the shorter term—adds weight to further retracement, particularly if bullish sentiment continues to fade.
Now, if we shift focus towards the 7.18 area again, it’s clear this level acts as a pivot. Should it give way under increasing selling pressure, the first obvious support falls to the 7.14 mark. However, we would not rule out fresh testing in the 7.11 to 7.10 range. These were levels previously established late last year and remain in line with the lower boundary of the broader medium-term trading range. We believe many participants will be closely watching these levels for signs of stabilisation or fresh momentum indicators.
Derivative traders particularly should be attentive to intraday volatility spikes here. A slow grind lower might appear controlled on spot markets but can cause sharp dislocations in price settings across option strikes or short-dated futures contracts. Should 7.18 unravel, delta hedging activity may need to be recalibrated quickly. Put spreads around the 7.14 area might gain greater interest in this backdrop and could benefit from rising implied volatility.
Technicals aside, any further resilience above 7.18 will likely depend on local macro momentum and—more pressingly—US data surprises that affect broader dollar demand. Davis, who has tracked this pair closely, pointed out that external demand for CNH hasn’t returned in size, and until that narrative shifts, rallies in the pair are likely to be sold into. His view echoes what we’ve seen in positioning data this week, where speculative longs trimmed sharply.
That said, a short squeeze remains a real possibility if option expiries around the 7.25 mark are pinned and there’s no material follow-through lower. Some implied vol floors may also be tested. For those of us managing gamma exposure during event weeks, standing too long in either direction at this stage could prove expensive. It’s also worth tracking hedge fund flow, which in recent sessions has tilted more defensively, signifying a move back to risk-neutral positions.
Overall, reactive positioning and disciplined risk parameters should take precedence. The area between 7.27 and 7.28 remains an upper-tier defence zone—but cracks below 7.18 will likely gather momentum quickly, particularly if macro data disappoints or liquidity thins.
