If Central Banks are Cutting Rates, Someone Forgot to Tell USD/CHF
Joe Perry March 2, 2020 4:10 PM
We are still seeing the flight to safety trade in USD/CHF.
With the coronavirus running amuck causing fears of a stalled world economy for Q1 and possibly even Q2, there has been talk of possible rate cuts by Central Banks around the globe, including the Federal Reserve. Although many have questioned how this will help people get back on planes and cruise ships, stock markets are taking this as a positive signal. Over the last 10 years or so, bad news is good, as the Fed has been there as a backstop to falling stock markets. As a result, US stock markets have opened the week in positive territory.
If talk of central banks cutting rates is positive, someone forgot to tell USD/CHF, as the fight to safety still seems to be in full effect. Granted, Manufacturing PMI for Feb from Switzerland did come out to better at 49.5 vs 48.1 expected and 47.8 last, however the PMIs are not the driver of markets these days. The Swiss Frac has always been a flight to safety currency and as a result, it is still going bid (USD/CHF lower)!
On a daily timeframe, USD/CHF moved lower in December to the target of the double top near .9662. Price then before traded sideways through January, before bouncing to the resistance and the neckline of the double top and the 200 Day Moving Average near .9850. As stocks sold off in mid-February, so did USD/CHF, as traders sought to move out of stocks in into the Swiss Frac. The pair currently is trading near horizontal support at .9550, which is the September 18th , 2019 lows. Bulls may be looking to buy near here, with stops below the September lows.
Source: Tradingview, City Index
On a 240-minute timeframe, the lows also coincide with the 127.2% extension from the low in early February to the highs at .9850. The RSI is diverging slightly, which may allow the pair stay around here as the RSI winds. Horizontal resistance near .9615/30. Bears will look to sell bounce near this level. Support is at the 161.8% Fibonacci extension from the same time period, near .9430, which is also within a band of support on the daily timeframe.
Source: Tradingview, City Index
Whether or not central banks decide to cut rates in response to a slowdown from the coronavirus, it still seems as if not all market participants think it will help. We are still seeing the flight to safety trade in USD/CHF.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.