In response to the Trump administration's 10% tariff on Chinese goods, Beijing vowed to challenge the decision at the World Trade Organization.

Moreover, Chinese authorities have:
→ imposed retaliatory tariffs of 15% on US coal and liquefied gas, and 10% tariffs on oil and agricultural machinery;
→ launched an investigation into Google for potential anti-competitive practices.

These recent developments have triggered a spike in volatility for the Chinese yuan against the US dollar. As the USD/CNH chart shows today, the ATR indicator is at its highest level since early November, when Trump celebrated his election victory.

On 9 January, in our analysis of the USD/CNH exchange rate, we noted:
→ the importance of the 7.35 level, which had acted as resistance for several months;
→ according to Wang Tao, chief economist at UBS China, the yuan may weaken to 7.6 per dollar by the end of 2025 if the Trump administration imposes higher tariffs.

Today's technical analysis of the USD/CNH chart shows:
→ the rate is supported by the lower boundary of an expanded ascending channel (shown in blue);
→ the 7.35 level continues to act as resistance (as indicated by the red arrow).

Thus, at the beginning of February 2025, we may witness the formation of a narrowing triangle (shown by the black lines), and a breakout could lead to a significant trend movement. How realistic this assumption is largely depends on how the ongoing tariff conflict between the US and China develops.

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