The third day in a row that sellers have rushed into the USD/CHF currency pair. This wave of damages is no exception, caused by a much-unified, weaker U.S. dollar. During the Asian session on Wednesday, it fell to a two-week low, floating just north of the 0.8220-0.8215 area. This sustained selling pressure is fueled by a perfect storm. Fiscal restraint among Americans and dimming hopes for a U.S.-China trade breakthrough are two big factors.
The Swiss Franc (CHF) is experiencing a comeback on safe-haven demand, pouring more support into the currency against the dollar. As the USD/CHF currency pair continues to decline, it’s not just a sign of shifting market sentiments, but of changing economic fundamentals. The duo had gained nearly half prior to that week, making this the biggest drop of the pair’s brief history. Looking at underlying fundamentals, analysts say there’s further and deeper declines to come.
Worries about the sustainability of U.S. fiscal policy have played a large role in pushing the dollar lower in recent months. Speculation about when the Federal Reserve will start cutting interest rates has grown stronger. Consequently, the USD has fallen to a near two-week low. Investors are closely monitoring speeches from influential members of the Federal Open Market Committee (FOMC), as these remarks could provide insights into future monetary policy shifts.
At the same time, trade tensions have returned, souring investor sentiment. Recent guidance from the U.S. federal government advises U.S. companies not to use Huawei’s Ascend AI chips. This one shot has gone a long way to puncture any lingering hopes of a U.S.-China trade truce. In response, China’s Commerce Ministry condemned these U.S. measures, characterizing them as “typical of unilateral bullying and protectionism.” The ministry went on to accuse the U.S. of an abuse of export control measures and an infringement on Geneva trade agreements.
Traders are adjusting to focus on developing geopolitical apparatus. In light of little major U.S. economic data on Wednesday, each of these occurrences may have a large impact on market sentiment. Our analysts remind us never to underestimate the importance of trade-related news. Specifically, it will play a dominant role in shaping broader risk sentiment and safe-haven demand in the forex markets.
The overall trading environment has been made more hospitable to short-term trading opportunities in and around the USD/CHF pair. Safe-haven demand will continue to fuel price action in this currency pair for the foreseeable future. As an example, take a look at our environmental USD/CHF down -0.69% vs. CHF heat map showing the depth of this persistent strength.