- The US dollar wins against the Swiss Franco, with the differentials of performance supporting US yields.
- Optimistic employment and PMI data published in the US decreases the demand for safe shelters, exerting pressure on the Swiss Franco.
- The USD/CHF bounces towards 0.8000 with the relative force index trying to move away from the overall territory.
The Swiss Franco (CHF) is weakening against the US dollar (USD) while the operators digest the latest published economic data of the two nations.
The status of the Swiss Franco as an active refuge, together with the flow of funds to risk assets, has limited its ability to extend profits against the dollar, pushing the USD/CHF towards psychological resistance at 0.8000.
Inflation data published by Switzerland showed that the consumer price index (CPI) increased in June. The monthly figure rose 0.2%, while the annual rate rose to 0.1%, after a contraction of 0.1%in May.
With the Swiss National Bank (SNB) reducing its 0.00% interest rate from 0.25% in June, citing concerns about deflation, this report offers some optimism for the economic growth prospects of Switzerland.
However, a great day of US economic publications before the Vacation of the US Day of the United States dominated the feeling. Thursday’s economic agenda included key employment metrics such as non -agricultural payroll (NFP), the weekly numbers of unemployment applications and ISM services PMI data.
In general, the combination of these data points eased the concerns of the health of the US economy and reinforced the expectations of a feat of fees by the Federal Reserve (Fed) in September.
With the NFP number showing that 147k jobs were added to the US economy in June, above the 110K estimate, the unemployment rate fell to 4.1%, lowering 4.2%. The weekly numbers of unemployment applications decreased to 233K, getting out of 237K last week.
A strong labor market relieves the pressure on the Fed to cut rates in July, which helped increase the demand for US yields.
The purchasing managers index (PMI) of the Services Institute of Supply Management (ISM) rose to 50.8, reflecting an increase in economic activity in the services sector in June.
In response to the data, the appetite of investors for the risk has improved. The US shares markets continued their positive career, quoting near historical maximums.
The USD/CHF bounces towards 0.8000 while the RSI leaves the overall territory
The USD/CHF pair is trying a modest recovery after reaching a minimum of several years of 0.7872 on Tuesday.
The price action has pushed the torque above 0.7950, showing signs of stabilization while the markets digest employment data in the US stronger than expected. Technically, the pair continues in a broader bassist trend. The relative force index (RSI) remains close to the over -sales territory, reading 33 after falling to 27 this week. This suggests that the bearish impulse may be decreasing. The immediate resistance is at the psychological level of 0.8000, followed by the simple 20 -day mobile average at 0.8092.
USD/CHF daily graphics
A sustained movement above these levels could open the door to a deeper correction towards 0.8157. Downwards, the inability to stay above 0.7900 would leave the torque vulnerable to a new proof of the minimum of 0.7872. In general, the perspective remains cautiously bassist unless the pair can recover key levels of resistance and confirm a broader reversal.
Feeling Risk – Frequently Questions
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
