Chart of the Day USDCHF

USDCHF – Probable Price Paths

Global risk sentiments remained cautious overnight even as New York saw a third consecutive day of slowing Covid-19 infections and several European nations plan to ease Covid-19 restrictions, albeit UK PM Johnson remained in intensive care. The S&P500 erased earlier gains and slipped 0.16% overnight in a volatile session, while UST bonds bearsteepened with the 10-year bond leading losses to close at 0.71% amid a sloppy auction and investors are bracing for a record $125bn cash management bill sales today. The 3-month LIBOR fixed lower for a second day at 1.3199%, with the LIBOR-OIS narrowing to 123bps. Crude oil prices slumped amid fading hopes of an OPEC+ agreement.

The Federal Reserve will release minutes of its March policy meetings today. Over the last few weeks the US central bank has announced a number of policy moves to help support the economy through the current crisis, including cutting interest rates close to zero and unlimited QE. Today’s minutes may give more insight of the reasoning behind those measures and the Fed’s assessment of the potential impact on the economy of the pandemic. They will also be read for any signs of potential future actions.

The SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook, and from a US administration that has put Switzerland on its currency manipulator watchlist. The risk liquidation in 2020, put a very large wave of demand for the Franc which has put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we’re at in the monetary policy cycle.

From a technical and trading perspective, the USDCHF daily chart has flipped bearish on yesterday’s close below the near term Volume Weighted Average price, bears will require a breach if yesterday’s lows to encourage the view of a further leg of downside to target .9392 which will be a key decision point for this market a failure to find sufficient bids to support prices here, bears will look for a retest of the .9200 lows. However if bulls reassert themselves at the equality objective there is scope for a move back through parity as highlighted in chart above. This USDCHF view should be considered with yesterday’s EURUSD perspective as these pairs more often than not trade inversely.

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