Market News & Analysis


Top Story

If Central Banks are Cutting Rates, Someone Forgot to Tell 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.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.