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  • Major European equity indexes rise on Monday on improved sentiment.
  • US Dollar Index waits for next catalyst above 98.
  • Focus stays on US-China trade headlines in the absence of significant data releases.

The USD/CHF pair gained nearly 100 pips last week supported by a broad USD recovery and positive rhetoric on the United States (US)-China trade dispute. Although the pair inched higher at the start of the week and touched its best level in more than a month at 0.9984, it seems to be having a tough time gathering momentum. As of writing, the pair was up 0.08% on a daily basis at 0.9980.

Trade optimism weighs on safe havens

Last Friday, US President Donald Trump said the trade deal with China was “potentially very close” to allow risk on flows to take control of the market action. Additionally, the IHS Markit’s preliminary Manufacturing Purchasing Managers’ Index (PMI) for November showed that the economic activity in the manufacturing sector is expected to expand at a more robust pace than it did in October and helped ease worries over a protracted weakness in the sector.

The US Dollar Index capitalized on the upbeat data and rose to fresh weekly top above the 98 handle to help the pair finish the week on a strong note.

At the start of the week, reports revealing that China has decided to raise penalties for theft of Intellectual Property (IP) provided a boost to the risk appetite as this attempt is seen as a move that would please the US. Reflecting the upbeat mood, major European equity indexes and the 10-year US Treasury bond yield are pushing higher on Monday.

In the second half of the week, the Federal Reserve Bank of Dallas’ Manufacturing Index will be the only data featured in the US economic docket. Ahead of this data, the US Dollar Index is flat on the day near the 98.30 mark. Meanwhile, fresh developments on trade are likely to continue to impact the risk perception.

Technical levels to watch for