USD/CHF loses ground and retreats below 0.9500

US dollar’s rebound from 0.9480 lows earlier today has been capped at 0.9530 on the American afternoon trading session, and the pair is losing ground as equity markets pick up, returning to levels sub 0.9500.

USD buoyed by risk aversion

The USD/CHF appreciated at the US session opening on Wednesday with the major equity indexes opening sharply in red. The investors rushed to safety amid fears of a second COVID-19 wave after various US states reported higher numbers of infections and China introduced travel restrictions after a new outbreak in Beijing.

Furthermore, the growing geopolitical tensions between India and China and FED Powell’s warnings about a long recovery from the pandemic have fuelled risk aversion further.

On the other end, the Swiss Franc remains vulnerable ahead of the Swiss National Bank monetary policy meeting due on Thursday. The Bank is widely expected to leave rates unchanged but market sources suggest that they might announce further monetary stimulus and that they suggest the possibility of cutting further in order to weaken the Swiss Franc.

USD/CHF seen moving lower, towards 0.9425 – Credit Suisse

The FX Analysis team at Credit Suisse observes the pair in a consolidation phase above 0.9500 ahead of a move lower, heading towards 0.9425, “We ideally look for weakness to extend further and see support initially at 0.9456, ahead of 0.9425/24, where we might see an attempt to hold at first. Removal of here would then expose the current June low at 0.9376, beneath which would see the recently completed ‘hammer’ candlestick negated and we would then expect to see another leg lower. Support is seen thereafter at 78.6% retracement of the March 2020 surge at 0.9337/21, where we also could see fresh buyers at first. Below here though could see the current low for the year at 0.9183 exposed.”