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29 Jul 2021

USD/CHF flirts with 200-DMA around 0.9075-70 area, six-week lows

  • The post-FOMC broad-based USD weakness dragged USD/CHF lower for the fourth straight day.
  • Dismal US macro data failed to provide any respite to the USD or lend any support to the major.
  • Bulls shrugged off a generally positive risk tone, which tends to undermine the safe-haven CHF.

The USD/CHF pair dropped to six-week lows, around the 0.9075-70 region in reaction to dismal US macro releases, with bears now awaiting a sustained break below the very important 200-day SMA.

The pair extended this week's rejection slide from the 0.9200 round figure and remained under some selling pressure for the fourth consecutive session on Thursday. The ongoing downward trajectory was exclusively sponsored by the heavily offered tone surrounding the US dollar, which, so far, has failed to benefit from a goodish rebound in the US Treasury bond yields.

The Fed Chair Jerome Powell took a dovish turn at the post-meeting press conference and emphasised that they were some ways away from substantial progress on jobs. Powell was also cautious about tapering and said that policymakers discussed some details but it will take a few more meetings to get into it, which continued acting as a headwind for the greenback.

The USD selling bias picked up pace during the early North American session after the disappointing release of the Advance second-quarter US GDP report. The first estimate showed that the world's largest economy expanded by 6.5% annualized pace during the April-June period, slightly higher than 6.4% in the previous quarter, though missed expectations by a big margin.

Adding to this, the US Initial Weekly Jobless Claims fell less than anticipated to 400K during the week ended July 23 as against the previous week's upwardly revised reading of 424K. The data reaffirmed speculations that the Fed will retain its ultra-lose monetary policy stance for a longer period and did little to provide any respite to the USD bulls.

Even a generally positive tone around the equity markets, which tends to undermine the safe-haven Swiss franc, also failed to lend any support to the USD/CHF pair. Bearish traders now await some follow-through selling below the 200-day SMA support before positioning for any further near-term depreciating move, possibly back towards the 0.9000 round figure.

Technical levels to watch

 

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