Swiss Franc Stalls At 0.9700

The trading week has opened on a down note, with the pending coronavirus health crisis dominating sentiment. Subsequently, safe-havens are up, led by another strong showing in the gold market. Valuations of the USD/JPY have been similar, with rates opening the week GAP down. As we roll toward the late-Monday forex session, the Swiss franc has entered consolidation, breaking the bullish safe-haven trend.

Today’s U.S. Treasury Auctions posted some interesting results. Sales of the short-term 3 and 6-Month T-Bills produced only a modest bump in 6-Month yields. There was more action in the longer-term issues, specifically the 2 and 5-Year T-Notes:

Event                                                  Actual     Previous

2-Year Note Auction                         1.440%       1.653%

5-Year Note Auction                          1.448%       1.756%

Falling yields in the 2 and 5-Year T-Notes illustrate the degree of concern being created by the coronavirus outbreak. Each is off almost ¼ point, a strong indication that big-money investors are buying insurance from uncertainty stemming from the outbreak.

Swiss Franc Enters Consolidation

Historically, the Swiss franc is among the most coveted safe-haven assets. This certainly hasn’t been the case today. As a result, rates are in a holding pattern near 0.9700.

Here are the levels to watch in the USD/CHF for the near future:

• Resistance(1): Bollinger MP, 0.9712
• Resistance(2): 38% Macro Wave Retracement, 0.9770 
• Support(1): Daily SMA, 0.9691
• Support(2): January’s Low, 0.9613

Bottom Line: Given the current uncertainty surrounding the coronavirus outbreak, a bearish bias is warranted toward the USD/CHF. If we see a surprise bump in the U.S. dollar/Swiss franc during Wednesday’s FED meeting, a premium sell entry may come to pass.

As long as January’s Low (0.9613) remains intact, I will have sell orders in queue from 0.9764. With an initial stop at 0.9809, this trade produces 50 pips on a slightly sub-1:1 risk vs reward ratio.

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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