USD/CHF Holds Support, Higher Global Bond Yields Undermine Franc Support

A reversal in global bond markets curbed potential franc demand and helped underpin USD/CHF support levels. Further gains in US and German yields will be needed to push the pair towards 0.9725.

During the European session on Thursday, there were reports from ECB sources that the central bank could announce a tapering of bond purchases at the September policy meeting.

The comments helped underpin EUR/USD which moved back above 1.1400 from below 1.1370.

The remarks also triggered a reversal in bond markets with German bunds losing modest gains earlier in the session to trade lower as 10-year yields moved back above 0.50%.

EUR/CHF moved significantly higher on the wider Euro recovery with a move to the 1.1030 area.

USD/CHF held above the 0.9600 support area and moved back above 0.9650.

The US data releases had little overall impact with a small decline in initial jobless claims to 247,000 in the latest week from 250,000 previously while headline and core producer prices both rose 0.1% for June.

Overall, EUR/USD continued to trade near the 1.1400 level during the New York session.

Overall risk conditions were benign even though equities were unable to extend the sharp gains seen in US trading on Wednesday and there was little in the way of defensive demand for the Swiss currency.

Bond yields are likely to remain pivotal in the short term with USD/CHF in a much better position to avoid losses if both US and Eurozone bond yields move higher.

USD/CHF 4-Hour Chart

usdchf13-07-17

Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.