USD/CHF Rallies Following Weak U.S. Data

The USD is putting together a nice session following the election of Boris Johnson as the U.K. Prime Minister during the U.S. overnight. A falling EUR/USD and rising USD/CHF have highlighted the action, as traders price in the impact of a “no-deal” Brexit. At this point, the Greenback is quickly becoming a preferred asset among currency players.

However, is today’s bullish move warranted? Several peripheral economic metrics out this morning suggest that FED’s new dovish stance may not be a short-term fix-all. Here is a quick look at the data:

Event                                                           Actual      Projected   Previous

Existing Home Sales (June)                        5.27M         5.33M          5.36M

Richmond FED Manufacturing Index       -12                   5                   3

The number from this group that jumps off the page is the lagging Richmond FED Index. Although a minor report, it is an official FED metric. This figure not only suggests that next week’s projected FOMC rate cut is appropriate, but that further action may be necessary. In addition, the U.S. real estate sector continues to disappoint, with Existing Home Sales for June lagging expectations. 

If nothing else, today’s data contradicts the bullish move in the Greenback.

USD/CHF Rallies Following Johnson’s Victory

The USD/CHF is on the rally, eclipsing yesterday’s highs. At press time (1:30 PM EST), rates are in the neighborhood of .9850 and rising.

Here is a quick look at the levels to watch going into Wednesday’s session:

• Resistance(1): Bollinger MP, .9846
• Resistance(2): Daily SMA, .9872
• Support(1): 62% Fibonacci Retracment

Bottom Line: For the moment, the USD is putting on a show against the majors. However, given today’s weak numbers and the pending FOMC meeting, one has to wonder for how long. If we see the USD/CHF extend its bullish range, then a sell from topside resistance will come into play.

Until elected, I will have sell orders in queue from .9874. With an initial stop at .9901, this trade produces 25 pips on a slightly sub-1:1 risk vs reward management plan.

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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