Safe-Havens Rally As The Greenback Fizzles

Posted Wednesday, July 8, 2020 by
Shain Vernier • 2 min read

It’s been another rough session for the Greenback, as investors continue to flood into safe-havens and equity products. At this point, one has to wonder if the long-awaited inflationary cycle is now upon us. Forex traders are betting that this may be the case, as the USD has lost its COVID-19 safe-haven status.

For the session, GOLD and the Swiss franc are pacing gains vs the USD. However, there are very few fundamental market drivers to be found. Aside from the spike in American COVID-19 cases and the anticipation of a second wave, there isn’t much reason for today’s run to the havens. If nothing else, the coronavirus pandemic continues to be the premier market driver.

On the traditional economic news front, MBA Mortgage Applications (July 3) came in at 2.2%, well above the previous release of -1.8%. This is a good sign for U.S. real estate as home buyers appear ready to resume consumption following a brutal spring season. However, this spike may be temporary as regional rollbacks of the U.S. COVID-19 reopenings are now underway.

Thus far, the Greenback has struggled mightily vs the majors. Let’s take a look at a key support level that is coming into play for the USD/CHF.

Greenback On The Ropes Vs The Swissy

July has opened with a bang for the Swiss franc, as evidenced by the weekly USD/CHF chart below. Rates have broken from consolidation near the 62% Fibonacci Retracement and are now heading toward 0.9350.

USD/CHF, Weekly Chart

For now, there is one level on my radar for the USD/CHF:

  • Support(1): 78% Retracement, 0.9341

Bottom Line: No doubt about it, the FED’s commitment to QE and dovish policy have placed selling pressure on the Greenback. The Swissy has been a beneficiary of the action and is driving toward March’s panic lows.

Until elected, I will have buy orders in the queue from 0.9351. With an initial stop loss at 0.9322, this trade produces 25 pips on a slightly 1:1 risk vs reward management plan.

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