- US Dollar gains versus European currencies on a quiet trading day after a volatile Monday.
- After losing more than 100 pips in three days, USD/CHF rebounds.
The USD/CHF is consolidating a daily gain of around 40 pips, posting the first gains after losing more than a hundred pips over the last three days. The short-term technical outlook points to the downside, but so far, the pair found a strong support around 1.0050.
Earlier today the pair tested yesterday’s lows around 1.0050 and then bounced to the upside, supported by a recovery of the US Dollar against majors. The DXY rose 0.15%, extending the rebound from 97.00 and rose to 97.55, the highest level since Thursday.
Equity prices recovered on Tuesday, as investors continue to look into US-China trade talks. The DOW JONES is up 1.05% and the NASDAQ 1.35%. US President Trump repeated today that tariffs are a great tool for growth and added the US is in a much better position today. Regarding data, the NFIB index showed small business optimism exceeded expectations rising to 103.5. On Wednesday, trade data will be released.
USD/CHF Outlook
In the short-term, the outlook favors the Swiss franc as price stabilizes below the 20-day moving average that turned to the downside. The pair trades at 1.0090, after the recovery lost strength near the 1.0100 area. The move higher in the USD against the CHF still looks like a correction of the previous slide and a break below 1.0050 could lead to a test of the parity level.
On a fundamental perspective, analysts at Citibank point out that “as the global manufacturing slowdown caught up with Switzerland, economic indicators have continued to cool sharply. We expect Swiss growth and inflation outlook to further deteriorate. Further rate cuts by the SNB may be needed and the SNB may even expand its balance sheet if necessary. Should Italy fears re-escalate, we think the SNB will remain “active in the FX market as necessary”. They forecast the USD/CHF pair at 0.99 over the next three months and at 0.98 for the next 6 to 12 months.
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