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Market Analysis – USDCHF

Today during the Asian session, the USDCHF pair shows a slight decline, losing momentum near the level of 0.9290 after two sessions of active decline. Market activity recovered noticeably after the Easter holidays; however, the US Dollar ignores strong US economic publications and last Friday’s labor market report. The currency is under pressure, as the leading hedge funds close part of the long positions. An additional negative factor is a decrease in the yield of Treasury bonds after renewing the next record highs. This is something we will explore more below.

Throughout the day, traders are likely to be focused on the meeting minutes of the Federal Open Market Committee of the US Feds and February statistics on the country’s trade balance. Traders will also pay attention to the speech of the representative of the US Federal Reserve, Charles Evans. European investors are awaiting a block of statistics from Markit on the levels of business activity in the services and manufacturing sectors for March.

Investors remain focused on the infrastructure development program of the administration of US President Joe Biden and its intention to increase the corporate tax from 21% to 28%. The plan is of greatest concern to investors, many of whom believe the rise is too large and could put pressure on an economy still recovering from the effects of the coronavirus pandemic. The increase in corporation tax may also alter the sentiment amongst major investors. 

Republican congressmen have already announced that they will not vote for the new infrastructure plan, calling for a significant reduction in its volume and a reduction in tax hikes from 28% to at least 25%. However, Joe Biden noted that he considers the threat of a weakening economy due to a corporate tax increase as frivolous, and the leaders of the Congress Democrats announced the possibility of approving the infrastructure package without the consent of the Republicans. 

Yesterday, we also had the release of the US New Job Openings, which is the number of new vacancies reported during the month. Even though this is not rated as a main price driver amongst major forex calendars, it is still strongly looked upon by traders and the market. The figure was released at 7.37 million, versus a prediction of 6.91 million. The figure was significantly positive and is the highest released since June 2019, though the support it provided the US Dollar is minimal 

Over the last 24 hours the US Dollar is strengthening against the Pound but is weakening against the Euro, Australian Dollar and the Yen. Today the currency is seeing mixed price movements with both bullish and bearish trends depending on the currency pair. Though when analysing the US Dollar index, we can see the candlestick is overal in a positive for the first time in 5 days. When looking at the US Dollar index we can clearly see the movement, so far, is no more than simply a retracement in the larger trend and currently is sitting at a significant prive level. 

A lot of traders are evaluating why the US Dollar is heavily declining, regardless of the positive employment figures from the NFP, unemployment rate, inflation and JOLTs statistics.  The US Dollar has had a positive year so far, which has mainly been driven by the previous financial stimulus, at times a poor performing US Stock Market and also an investors anti-risk approach in the midst of other major currencies declining such as the Euro, Japanese Yen and many exotic currencies such as the Turkish Lira. The recent change in investors’ risk appetite is the first reason for the declining US Dollar as investors look away from US based lower risk investments such as treasury bonds and look further into stocks as earnings season approaches. 

Secondly, we also have a change in sentiment towards the US Dollar as the new president looks to increase corporation tax. Lastly, the latest development regarding hedge funds and private investment banks around the globe will be closing positions on the US Dollar due to lack of performance and margin calls. The price of the US Dollar is massively determined by traders activity, which is largely made up by hedge funds, private banks and large companies, hence why traders are paying a close eye on how this is going to further drive exchange rates. 

Resistance levels: 0.9350, 0.9400, 0.9471, 0.9500.

Support levels: 0.9300, 0.9250, 0.9200, 0.9163.

 

 

 

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.
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