- USD/CHF softer as falling US yields undermines USD demand vs low yielding CHF, EUR and JPY.
- The 50DMA at 0.9135 is for now providing strong support.
USD/CHF has been choppy today, seeing weakness during the European morning to fall from highs of the day of around 0.9170 to lows of just above 0.9130. The pair currently trades close to 0.9150, around 15 pips lower or 0.2% on the day.
CHF and other funding currencies boosted as US yields drop
US bonds saw a sharp drop on Monday in the wake of Pfizer and BioNtech’s vaccine announcement. The associated rise in US yields at the time seemed to boost USD vs funding (low yield) currencies such as CHF, EUR and JPY (all countries where the central bank has implemented negative rates).
On Thursday, a sharp retracement lower in US bond yields has taken place, with yields on US 10-year debt down nearly 0.10%. As a result, the USD has faced unwinding in the strength seen earlier on in the week versus the likes of CHF, EUR and JPY.
Further supporting the safe-haven swiss franc is an increasingly risk-off tone to broader market trade; the S&P 500 currently trades roughly 1.3% lower on the day, crude oil markets recently slipped into the red and risk-sensitive G10 currencies such as NOK, AUD, CAD and NZD are underperforming, alongside GBP, amid evidence of ongoing Brexit negotiation gridlock.
USD/CHF supported by 50DMA for now
USD/CHF has been unable to break to the south of its 50-day moving average (DMA) at 0.9135, despite two attempts during the European session. However, if US yields continue to fall and further USD weakness vs low yielding FX (EUR, CHF and JPY) is witnessed, USD/CHF might again turn lower for a third attempt at breaking below the 50DMA.
Should this level go, the 21DMA sits just above the psychological 0.9100 level at 0.9107 and just below the 38.2% retracement from this week’s high at 0.9192 (set on Wednesday) and the Sunday open low at 0.8980. This ought to be a solid area of support.
Conversely, if the bulls prevail, there is little by way of resistance ahead of a retest of this week’s aforementioned high at 0.9192. Beyond that, the next significant area of resistance is the 2 November high at just above the round 0.9200 number.
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