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  • USD/CHF printed fresh cycle lows, but bears may not be done yet.
  • US dollars are out of favour in the market in anticipation of major and imminent vaccine distribution.

USD/CHF is trading at 0.8891 having travelled between a range of 0.8875 and 0.8946 on the day so far.

The pair has potentially established the highs and lows for the sessions and headed for consolidation for the afternoon.

CHF has been a favourite G10-FX during on-going uncertainty while the US dollar has been palmed-off on expectations of stimulus and a covid vaccine. 

The US dollar index, DXY, traded near a 2-1/2-year low on Monday after weak US Nonfarm Payrolls on Friday heightened expectations of economic stimulus from both the Fed and the UIS government. 

The jobs data showed non-farm payrolls increased by 245,000 last month, the smallest gain since May, a sign the jobs recovery was slowing. 

Meanwhile, discussions aimed at delivering fresh coronavirus relief gathered momentum in the US Congress on Friday as well.

A bipartisan group of lawmakers worked to put the finishing touches on a $908 billion bill. Members of Congress are expected to offer the legislation as early as Monday. 

There was also speculation that Congress is likely to pass a one-week stopgap spending bill to avert a shutdown at the end of this week.

This should be a favourable outcome for risk appetite and give negotiators more time to figure out what they are going to do with government funding on a longer-term basis.

In addition, the Federal Reserve is expected to make more adjustments to its quantitative easing later this month which is helping to underpin risk sentiment on Wall Street in December.

As for positioning, analysts at Rabobank explained that CHF net long positions were very little changed but well supported on fears about a second wave of the pandemic in Europe. 

”While the SNB’s FX intervention policy may discourage some safe-haven buying, the CHF is still likely to see an inflow on any worsening of risk appetite. Vaccine good news could relieve some buying pressure on the CHF.”

USD/CHF technical analysis

The price’s London breakout from the typical Asian consolidation marked the day’s highs and was subsequently sold off to take out stops below the Asian range. 

The New York lows have been marked and have encouraged buying back towards an equilibrium from which could provide the next bearish trading opportunity. 

The latest hourly point of control (POC) is around 0.8907 and the prior support which would be expected to act as resistance is at 0.8905. 

In trading with the bearish trend, the confluence of the 38.2% and 50% Fibonaccis of the latest bearish impulse, where the point of control meets old support structure, is a compelling entry point for a bearish continuation. 

The DXY has also corrected about as far as the market seems to want it to in a 50% mean reversion of the last bearish impulse. This supports the bearish outlook for USD/CHF.

However, a more meaningful correction would be expected in the greenback for a proper test of the resistance structure and confluence of a 61.8% Fibonacci.

This supports a slightly deeper correction in USD/CHF to the POC, as illustrated above, before the next bearish impulse. 

DXY daily chart