- USD/CHF pops on solid US data ahead of the Thanksgiving holiday.
- Risk-on sentiment and poor domestic economic conditions to keep franc under pressure.
USD/CHF is currently trading tucked in below parity having made a high of 1.0000, (the highest level since mid-October), in a move from the day's low down at 0.9967. North American markets will likely remain quiet into the month-end as traders head home for their Thanksgiving holiday.
US stocks markets will be closed on Thursday in observance of Thanksgiving. On Friday, the New York Stock Exchange and the Nasdaq will resume normal trading hours but will close early at 1 p.m. ET. The US bond market will also be closed on Thursday which usually means quieter times for FX markets leading up to the holiday.
US dollar takes on key resistance on solid US data
However, we have seen a last-minute flurry of business and solid US data gave the US dollar an edge on Wednesday with the DXY printing a high of 98.44, travelling from a low of 98.28 and respecting the support of the 50-hour moving average once again. Personal Consumption Expenditures YoY beat expectations at 1.3% vs 1.2% expected while MoM came in line with expectations at 0.1% but beat the prior 0% - hence a rise in US Treasury yields with the ten-year yield rising over 1% on the day. Meanwhile, the Federal Reserve is on hold which likely caps further upside potential in yields and limits prospects of a run-away US dollar.
CHF on the back foot on domestic economic woes and in risk-on markets
The Swiss franc, on the other hand, stays on the back foot. We have seen elevated levels of risk appetite again on prospects of a so-called 'Phase-One' trade deal between the US and China. The franc has been the worst G10 performer behind the pound in recent sessions. However, the franc is also under pressure in its own right due to poor domestic economic conditions which have been intensifying of late.
Analysts at ING bank now expect Gross Domestic Product to grow by only 0.9% in 2019 (vs 2.8% in 2018). "On top of that, the inflation report on Friday should signal a further slowdown in headline CPI to 0.00% YoY," the analyst argued.
"All this, in turn, is likely to further convince markets that the SNB will remain stuck to its ultra-accommodative stance for a long time, thereby eliminating any internal support to the franc."
USD/CHF levels
Bulls have pierced the 1.0000 target following a solid surge through the 200-day moving average of late. Bulls have maintained their form above the 200-DMA and confluence of a 50% retracement of the May-YTD lows range and are on target for a test of the 61.8% Fibonacci level of the same range.
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