USD/CHF bulls capped at 76.4% Fibo as stock drop on trade-war fears

• USD/CHF has extended its climb from the swing lows at the start of this year,  at a low of 0.9715, to a high of 1.0029, meeting the 76.4% Fibo retracement level where the bulls have been capped on risk off flows this Thursday.  
• USD/CHF is currently trading at 1.0013, down from a high of 1.0029 and a low of 0.9999.

Markets have nosedived, and with it, the usual risk off suspects have benefitted, with the yen, gold and Swiss franc moving to the top of the leaderboards. However, the euro has also picked up a bid which is weighing on the DXY and likely aiding the bears along in USD/CHF with 1.0000 pierced already.  

White House Adviser Larry Kudlow was reported to have said in an interview with Fox Business Network that a “sizable distance” remains between the U.S. and China in protracted trade negotiations.  Kudlow added that previous talks covered “a tremendous amount of ground” but said enforcement would be very important, as well as technological and structural issues.  

This has been a well-percieved requirement by now and a topic of discussion in the media and on trading desks, although it has reminded markets that risks remain and negotiations are ongoing. Much of the expected trade deal is priced into the markets already, so it is a little wonder when that optimism is dented by such statements, investors are quick to square positions and take a profit. Additionally, CNBC, citing sources, has reported that there will not be a meeting betweenTrump and Chinese President Xi Jinping before a March 1 deadline for tariffs to increase on Chinese goods.

Stock market reactions

As a result, the damage seen so far in the stock markets has seen the Dow Jones Industrial Average DJIA tumble 371 points, or 1.5%, to 25,017, the S&P 500 index SPX, -1.36% has dropped by 1.6% at 2,688, while the Nasdaq Composite Index COMP, -1.56% contracted by as much as 1.9% to 7,238.

USD/CHF levels

Bulls have started to cash out at the 76.4% Fibo retracement level of the Nov 2018 decline although the bullish trend remains dominant. A break above 76.4% opens R1 located at 1.0037 ahead of 1.0052 and R3, up at 1.0079. However, on a continuation of the downside, the 21-D SMA is key located below S3 at 0.9954 at 0.9931 with a confluence of the fractal swing lows of 0.9950. The 38.2% retracement Fibo is then found at 0.9871.