USD/CHF drops to fresh 5-week low as CNY drop, trade pessimism favor risk-safety

• Doubts over further US-China trade talks, sluggish China PMI, triggered CNY drop to the record high.
• The resultant flow off the markets extended the previous risk-aversion, dragging treasury yields to multi-month low.

With the market’s rush towards risk safety, the USD/CHF pair flashes fresh five-week low as it trades near 0.9788 on early Monday.

Not only China’s vow to “defend the country’s interests” after the US President Donald Trump’s fresh tariffs, but the news headlines from the dragon nation raising doubts over further trade talks between the world’s top two countries also dragged the Chinese Yuan (CNY) down and favored risk aversion wave.

Supporting the downside momentum was weaker than expected prints of China’s Caixin Services Purchasing Managers’ Index (PMI) data for July.

It should also be noted that Iran’s seizure of third oil tanker in a month and growing speculations of no-deal Brexit also played their part to propel the safe-havens like the Japanese Yen (JPY), Gold and the Swiss Franc (CHF).

With this, global treasury yields extended their previous south-run wherein the US 10-year yields decline more than eight basis points to 1.768% whereas Germany’s 30-year bonds yields slumped to below 0.0% for the first time in record.

While trade/political plays can keep playing background music for the market, US Markit Services PMI and ISM Non-Manufacturing PMI stand tall to perform their duty on the economic calendar.

Technical Analysis

Not only June 24 high near 0.9785 but 0.9770 also can limit the pair’s decline towards January month low of 0.9715. Alternatively, early-June low surrounding 0.9855 and July 31 low of 0.9885 may please buyers during the pullback.