- USD / CHF drew some buying on the dips on Friday amid widespread USD strength.
- Expectations that the Fed will start to wane soon extended support to the USD.
- Risk aversion sustained the safe haven CHF and limited gains for the pair.
The pair USD/CHF it bounced around 30 pips from the daily lows and rose to the upper end of its daily trading range, around the 0.9185-90 region, although it lacked tracking.
The pair attracted some buying on dips near the 0.9160 region on the last trading day of the week and is now looking to take advantage of this week’s positive move from levels below 0.9100. The rally was solely sponsored by strong bullish sentiment prevailing around the US dollar, bolstered by expectations that the Fed will begin to slow down its massive asset purchases later this year.
The Minutes from the last FOMC meeting held July 27-28 appear to have convinced investors that the Fed is now comfortable rolling back its pandemic-era stimulus. Policymakers said the additional substantial progress benchmark has been met in terms of inflation and peak employment. This, in turn, pushed the USD index to a nine-and-a-half-month high on Friday.
Aside from the possibility of the Fed announcing its phase-down plan at the next meeting in September, the nervousness of COVID-19 dampened investors’ appetite for perceived riskier assets. This was evident from the prevailing climate of risk aversion in the equity markets, which underpinned the Swiss franc – safe haven and turned out to be the only factor limiting gains for the USD / CHF pair.
In the absence of major economic releases to move the US market, market participants are now waiting for new catalysts before placing aggressive directional bets. Therefore, attention shifts to the Jackson Hole Symposium scheduled for August 26-28. Meanwhile, USD price dynamics and broader market risk sentiment could generate some trading opportunities around the USD / CHF pair.
Technical levels
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