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.