- USD/CHF is trading in a tight range following Monday’s drop.
- US Dollar Index stays calm around 90.70 on Tuesday.
- Swiss government expects economy to contract by 1% in last quarter of 2020.
The USD/CHF dropped to its lowest level in nearly six years at 0.8849 on Monday and seems to be having a difficult time staging a meaningful rebound amid the broad-based USD weakness. As of writing, the pair was flat on the day at 0.8863.
USD’s market valuation continues to impact USD/CHF movements
At the start of the week, the US Dollar Index (DXY) slumped to its worst level since April 2018 at 90.42 as investors showed no interest in the greenback in the risk-positive market environment. Renewed hopes for an EU-UK trade deal and the coronavirus vaccine rollout allowed risk flows to dominate the financial markets.
On Tuesday, the lack of significant fundamental drivers is causing investors to remain on the sidelines and paves the way for a consolidation period. At the moment, the DXY is posting small daily losses at 90.66.
Later in the day Industrial Production, Capacity Utilization and IBD/TIPP Economic Optimism Index will be featured in the US economic docket. In the meantime, the S&P 500 Futures are up 0.6% on the day, suggesting that the USD is likely to remain on the back foot in the second half of the day.
On the other hand, Switzerland’s State Secretariat for Economic Affairs (SECO) announced on Tuesday that it expects the economy to contract by 1% in the last quarter of 2020 and stay flat in the first quarter of 2021. “We expect growth to turn positive in the second quarter and accelerate throughout the year as vaccines become available, the weather gets warmer and countries ease their restrictions,” SECO economist Ronald Indergand told Reuters. Nevertheless, market participants largely ignored this report.
Technical levels to watch for
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