- USD/CHF bears are all over the cross on dollar weakness into the highly anticipated Fed announcements.
- The Fed’s intervention into financial markets this year has propped up risk assets, markets expect much of the same which weighs on the greenback.
USD/CHF is trading at 0.9139 ahead of the Federal Reserve, down by 0.43% having travelled within a 0.9132/87 range on the day so far.
The greenback cannot get off the floor this week despite daily attempts which have been a sell on rallies.
DXY is now looking into the abyss on a break of June 2018 lows (93.20).
Speculators have raised their short best on the dollar this month and fled to the Swiss franc, the yen and pound and commodity currencies such as the Aussie.
Although the US dollar is the world’s receive currency and attracts a safe haven bid at times of great uncertainty, during panic and from outright demand pertaining to the shortfall in the offshore EUR/USD debt market, the expectations are for the dollar will continue to decline.
The Fed’s intervention into financial markets this year has propped up risk assets, damping down demand for safe havens. This can be displayed in the asset bubbles let freight and centre.
Today’s meeting could well be pivotal for risk apatite, (equities) the CHF and the US dollar.
While we are not expecting any big policy announcements when theFederal Reserve speaks its mind after it wraps up its two-day meeting this afternoon (top of the hour), markets are nonetheless laser-focused on what the central bank has to say.
Fed is expected to be ready to do more
The Fed is expected to remind markets it is ready to do more if needs to, but it’s not ready to commit to yield curve control or lock-in of future rate hikes to overshoot their inflation targets.
Fed Fund futures show the market expects for US rates to remain pinned to the ground at zero for at least the next three years.
Prior to the meeting, last week’s positioning data shows that Asset managers extended their overall net short dollar positions to a new record high, but leveraged funds are still net long overall.
Today’s meeting could be the catalysts, if they haven’t already, which encourages further unwinding of those long positions which could see a further near-term downside for the USD.
Considering the close correlation that between the Swissy and euro, and how the EUR has been the main beneficiary of dollar weakness so far, CHF would be expected to benefit from any profound moves between EUR/USD or in risk aversion and flight to safety.
USD/CHF levels
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