The US dollar is weakening ahead of the significant data or event, which has led to the USD/CHF pair posting its worst daily loss in two weeks. The cautious optimism is supported by stimulus from China and the anticipation that central bankers may become less hawkish. In the midst of a slow day, the indications from the options market favor intraday bears.
US GDP and Core PCE will be used as decorations for the calendar, but risk catalysts are the most important factor.
During the early hours of Thursday morning in Europe, the USD/CHF currency pair accepted offers to renew intraday lows at 0.9625. In response, the value of the pair based on the Swiss franc (CHF) fell by the highest it has in over two weeks, reflecting widespread weakness in the US dollar.
As a result of the CHF fall, the US Dollar Index (DXY) drops by a half of a percent as bears attempt to break below the 108.00 level. This occurs because a risk-seeking attitude reduces the demand for the safe-haven dollar. The recent decline in rates on US Treasury securities is another factor pushing the DXY in a downward direction.
During the process of identifying the catalysts, it was discovered that mixed data and concerns about an imminent economic slowdown favoured the decline of the DXY. These concerns are likely to push markets towards hoping that Fed Chair Jerome Powell will not make any major hawkish announcements during his speech on Friday.
The same may be said about the possibility of stimulus coming from China in the midst of rising economic confidence in the economy of the world’s second-largest nation. According to Bloomberg, China’s Cabinet, the State Council, has prepared a 19-point policy package while proposing economic stimulus measures worth a total of CNY1 trillion ($146 billion) to promote growth that has been hurt by covid lockdowns and the crisis in the housing market. In addition, on Thursday, Li Zhong, Vice Minister of the Ministry of Human Resources and Social Security, said that China would prioritise the creation of new employment and advance policies in the areas of finance, the economy, and industry to assist the stability of the job market.
As a result of these maneuvers, the mood of the market is improving, which puts pressure on the US Dollar. In spite of this, the rates on US 10-year Treasury bonds reached a new high point in excess of 3.10% the day before, which was the highest level in around two months. However, it seems that sellers of US bonds have been facing a variety of problems as of late. Having said that, the benchmarks on Wall Street posted slight advances, which allowed S&P 500 Futures to stay mildly bid at approximately 4,150 as per the latest available information.
Moving on, the second edition of the US GDP for the second quarter will be essential, as will the second version of the US Personal Consumption Expenditure (PCE) for the same time. On the other hand, the Fed Chair Powell’s confrontation on Friday will get a significant amount of attention.
Any good surprise might enable the USD/CHF prices to stabilize their most recent losses, considering the anticipated favorable expectations from the data that is set to be released. Even still, substantial shifts look less likely to materialize.
Analyses of the Technical Nature:
A decisive breach to the downside of an ascending trend line that is two weeks old and was located around 0.9625 when the press went to press looks to be essential for the USD/CHF bears to reclaim control.