USDCHF keeps bleeding for a second consecutive week, having accelerated the decline on Friday. A massive risk aversion amid fresh gloomy headlines from the coronavirus front keep high-yielding assets on edge, in turn fueling demand for safe-haven assets like Swiss franc, Japanese yen and gold.
In recent developments, the Bank of England Governor Carney warned that coronavirus could mean economic growth downgrade for the United Kingdom. Meanwhile, the first coronavirus case was confirmed in New Zealand, pushing the domestic authorities to impose even stricter response move. South Korea confirmed 256 more cases, with the total number of cases exceeding 2,000. China reported 327 new coronavirus vases and 44 deaths for February 27. Also, geopolitics added to the negative sentiment in the global markets. In particular, nearly 30 Turkish troops were killed in Syria. The developments risk to fuel a conflict between Turkey and Russia, as Moscow backs the Syrian regime.
Against this backdrop, investors continue to get rid of global stocks, with US equities have been losing ground at the fastest rate since the global financial crisis. So, demand for safe-haven frank keeps rising. USDCHF is nearing the 0.96 handle again, and a break below it will open the way towards the lowest levels since September 2018. The next support comes around 0.9575 and then in the 0.9540-0.9530 region.
As long as the situation surrounding the coronavirus continues to deteriorate, with more and more countries reporting the outbreak of the disease, risk aversion will keep driving franc higher. Moreover, the additional bearish risk for the dollar are the rising odds of a rate cut by the Federal Reserve some time later this year, as the recession threat has reemerged amid the coronavirus spreading.
In other words, it’s too early to call a bottom for the USDCHF pair that may extend the decline towards the above mentioned lows. Furthermore, the losses could be even deeper should investors push the panic button on coronavirus theme.