Yield trends will remain negative for the Swiss currency with the franc also undermined by a lack of defensive support. There is scope for further near-term USD/CHF support close to 0.9600 with a potential move to the 0.9725 area.
There was mixed sentiment surrounding Friday’s US employment report with the stronger than expected increase in non-farm payrolls offset by a subdued figure for average earnings.
After initial losses, there was a more optimistic assessment of the data with the US currency regaining some ground as USD/CHF found support close to the 0.9600 level.
The latest COT data recorded a small increase in short non-commercial franc positions, although the total remained below 5,000 contracts compared with a figure above 20,000 during May. The overall positioning data suggests a lack of underlying conviction surrounding franc trends.
Underlying demand for defensive instruments remained generally weak on Monday with gold prices and the Japanese yen both generally under pressure with only limited corrective recoveries. In this environment, underlying demand for the Swiss franc was also weaker.
EUR/CHF moved above the key 1.1000 level on Monday which was the highest level for over 13 months. Gains on the EUR/CHF cross had an important impact in cushioning USD/CHF from any potential selling pressure. As long as the Swiss currency struggled on the Euro cross, there will be some underlying dollar protection.
The dollar overall was able to make some headway and USD/CHF rallied to the 0.9670 area in relatively subdued conditions amid a lack of fresh incentives.
USD/CHF 4-Hour Chart