- Swiss Franc outperforming amid risk aversion following an escalation in trade war tensions.
- US Dollar mix on Friday after NFP and amid lower US yields.
The USD/CHF trades at 0.9824, the lowest level since July 23 and significantly below the two-month high it reached on Thursday at 0.9974. In a few hours, the pair lost more than a hundred pips, making a dramatic reversal.
Low yields, risk aversion, ECB easing… all good for CHF
The Swiss Franc is about to end the week among the best performers across the globe. It started to outperform on Thursday and accelerated following Trump’s announcement of more tariffs to Chinese goods that triggered a wave of risk aversion.
Another factor behind the rally in CHF are lower bond yields in Europa and also in the US. The entire German yield curve turned negative today while the US 10-year yield bottomed today at 1.83%, the lowest since November 2016.
The strength of the Swissy is also seen in the EUR/CHF pair that is trading at 1.0912, a two-year low while GBP/CHF is having the worst week in years and stands under 1.2000, on its way to the lowest weekly close ever.
Market participants ignored today’s US jobs report that came mostly in line with expectations. “This is still a labour market that is “strong” and “in a good place,” as Powell put it on Wednesday. The concern, of course, is that trade tensions will have a greater impact on the US economy in the coming months””a risk that is getting harder to dismiss. We expect the Fed will cut rates again in September“, said Josh Nye, Senior Economist at RBC Economics Research.
Technical outlook
The sharp reversal pushed USD/CHF back below the 20-day moving average (0.9880) and changed the short-term to the downside. Attention now turns toward the 0.9800 area that offered support in July. A break lower would clear the way to more losses.
On the upside, the greenback needs to rise back above 0.9900 to remove the bearish bias; before an intermediate resistance might be seen at 0.9850/60.
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