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  • Having traded as high as 0.9140, USD/CHF has reversed back beneath its 21DMA at 0.9110 in recent trade.
  • Renewed US fiscal stimulus hopes that hurt USD contributed to the reversal, with the pair now eyeing a break below 0.9100.

USD/CHF has been choppy today, hitting highs close to 0.9140 during Thursday’s European session above the pair’s 50-day moving average (DMA) at 0.9133, only to abruptly reverse these gains in recent trade and move back below the pair’s 21DMA at 0.9110 in recent trade amid a bout of risk on driven USD weakness.

US fiscal stimulus talk restart hurts USD

USD saw downside across the board late in the US session on renewed US fiscal stimulus hopes, after Senate Minority Leader Chuck Schumer said that Senate Majority Leader Mitch McConnell had given the go-ahead for a restart of negotiations on another coronavirus aid package.

The news at the time also boosted US equities (and risk appetite more broadly), but, after the close, S&P 500 futures gave all of those gains back on the news that US Treasury Secretary Steven Mnuchin asked the Fed to return any unused stimulus funds from some of it’s 13(3) facilities (emergency lending programmes) to the Treasury.

The move, which Mnuchin said would return $455B to the Treasury, is being seen as undermining the Fed’s ability to provide ongoing support to the economy, hence the negative reaction in stocks. FX markets are yet to show much of a reaction to this news, however; if S&P 500 futures see further downside at the 23:00GMT reopen of futures trade and FX markets do start to play catch up, USD could start to see some upside, though upside might be limited against fellow safe-haven currencies such as JPY and CHF, meaning the scope for a USD/CHF rally on this news is less than say in USD/CAD.

Note also that the just out news that California is to impose a 10 pm curfew on 94% of its population makes the risk of an adverse market move at the reopen of futures trade more likely.

US economic data continues to be largely irrelevant for USD at the moment, with markets more focused on the themes that will affect the economy in the remainder of Q4 2020 and onwards into 2021; themes such as the virus, lockdowns, and fiscal stimulus. All of this is seen as much more important right now than backward-looking data – that is certainly how the Fed sees it anyway (their major concern right now rising Covid-19 numbers in the US, and they don’t seem to care much about the stronger than expected recovery in the US economy thus far this year).

Thus, USD/CHF will continue to trade as a function of risk/USD flows.

USD/CHF looks to break back below 0.9100

USD/CHF has, for now, found support at the 0.9100 level and a downwards trendline linking the 11, 16 and 18 November highs (which comes into play just above 0.9100). If the pair can break below this level, this opens the door for a test of support at 0.9090 (the 29 October and 3 and 17 November lows).

USD/CHF hourly chart

USD/CHF hourly chart

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