USD / CHF falls to 5-week lows amid risk aversion, lacks follow-up

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  • USD / CHF was unable to capitalize on its modest intraday rally to levels just above 0.9200.
  • The momentum of risk reduction in the markets benefited the safe haven CHF and exerted some pressure.
  • High US bond yields revived demand for US dollars and helped limit the pair’s further losses.

The pair USD/CHF it fell more than 25 pips from the swing highs of the European session and fell to the lowest level since mid-September, around the 0.9180 region in the last hour.

The pair struggled to preserve its modest intraday gains at levels just above the 0.9200 mark and has now slid into negative territory for the third day in a row. The risk reduction momentum in the markets benefited the safe-haven Swiss franc, which, in turn, was seen as a key factor driving new selling around the USD / CHF on Thursday.

Concerns about possible contagion from Evergrande’s debt crisis in China resurfaced after the heavily indebted developer said Wednesday that a $ 2.6 billion stake in its real estate services unit failed. This, in turn, dampened investors’ appetite for perceived riskier assets and boosted flows towards traditional safe-haven currencies, including CHF.

Meanwhile, the intraday decline did not appear to be affected by a modest pickup in demand for the US dollar, which was supported by high yields on US Treasuries. Indeed, the benchmark 10-year US government bond yield held steady near the 1.67% mark, or the highest level since May amid expectations of an early policy tightening by the Fed. .

This week’s regrettable macroeconomic releases in the United States (industrial production and housing market data) pointed to a weakening in economic activity. However, investors appear to be convinced that a faster-than-expected rise in inflation could force the Fed to adopt a more aggressive policy response and have been weighing the possibility of a rate hike in 2022.

Therefore, it will be prudent to wait for a strong follow-up sell before placing new bearish bets and positioning yourself for an extension of the recent bearish stretch observed for the last three weeks or so. The next step will be the US economic agenda, featuring the Philadelphia Fed Manufacturing Index releases and the usual weekly initial jobless claims.

This, coupled with a timed speech by Fed Governor Christopher Waller and US bond yields, could influence USD price dynamics. Traders will follow the signals of the broader market risk sentiment to seize some short-term opportunities around the USD / CHF pair.

Technical levels

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