Swiss franc continues to rise for a fifth day in a row already. Following failed attempts to withstand the selling pressure, the pair had to dip to the lowest level since September 2018 around 0.9630 on Wednesday. The fact that the dollar has accelerated the decline is mostly due to a more vivid risk aversion in the global financial markets amid investor skepticism over the US-China trade deal after Washington said that the existing tariffs against Chinese imports will stay in place after the signing of the phase one agreement. Also, the selling pressure intensified on the news that the United States decided to put Switzerland on the so-called watch list as a currency manipulator. As a result of a broad-based weakness in the dollar, the pair had to extend losses despite the SNB was trying to cap the rally in the national currency.
In general, the USD index feels uncomfortable this week, after a breakdown from a tight range earlier. As a result, the greenback hit the lowest level in a week below 97.30. this weakness is in part due to another disappointing economic report out of the United States. In particular, producer prices rose just 0.1%, as well as the core index, missing initial estimates. Following the release, a better-than-expected Empire State index, which improved to 4.80, failed to inspire buyers. Should the dollar index resume its recovery, the key target still comes around the 200-daily moving average around 97.70.
Now, as the pair has broken below the 0.9650 level which is now the immediate resistance, there is a possibility that the prices will go even lower, down to 0.9600 should investor sentiment remain negative in the days to come. On the other hand, if the details of the trade deal and the rhetoric by the US and China in general manage to improve risk appetite, the pair may witness a fairly strong recovery, with the initial target coming at 0.9670. once above 0.97, the selling pressure would ease somehow.
