by SignalFactory · January 31, 2022 | 11:59:36 UTC
The USD/CHF pair maintained its bid tone heading into the European session and was last seen hovering near the daily high, around the 0.9310-0.9315 region.
Following last week’s modest pullback from a two-month high, the USD/CHF pair caught fresh bids on Monday and might now be looking to build on its recent strong rally from the 0.9100 mark. The positive move was sponsored by a generally positive tone around the equity markets, which tends to undermine the safe-haven Swiss franc.
On the other hand, the US dollar witnessed some profit-taking and moved away from the highest level since July 2020 touched on Friday. That said, an uptick in the US Treasury bond yields and a more hawkish tone adopted by the Fed should act as a tailwind for the buck. This supports prospects for further gains for the USD/CHF pair.
The Fed indicated last Wednesday that it could raise interest rates at a faster pace than anticipated to contain stubbornly high inflation. The market quickly started pricing in the possibility of five quarter-point rate hikes by the end of 2022 and that the first hike in March could be 50 bps, which, in turn, favors the USD bulls.
Market participants now look forward to the release of the Chicago PMI later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics. Traders will also take cues from the broader market risk sentiment to grab some short-term opportunities around the USD/CHF pair.
At the same time, the Dutch multinational banking business Rabobank has been making predictions about what would happen in the event of a conflict in Ukraine and the fallout from sanctions upon Russia.
Rabobank’s global strategist Michael Every has stated “We are in the unusual position of global headlines and politicians warning of the risk of a major war, and yet markets — until very recently — remain mostly unconcerned. “Where they are falling, it is out of fear of rates going up, not bombs going off.”
Rabobank expects that the US dollar, Japanese yen, Swiss franc, and gold would be the obvious go-to’s in the event of a conflict. The Russian Ruble would slump in the event of war or sanctions, as would the Euro.
Further Consequences Even if a conflict is avoided, Rabobank still forecasts longer-term consequences, as ”This will still have major policy implications given this was a very near-miss. It will accelerate some of the global trends already underway, many of which had been sparked by the COVID crisis and increasingly aggressive foreign and trade policies”.
USD/CHF Long (Buy) Enter at: 0.93451 T.P_1: 0.94146 T.P_2: 0.94586 T.P_3: 0.95130 S.L: 0.92549
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