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DXY Unchanged Following Weak US Data, CHF Moderately Outperforms

FOREX
  • Early greenback strength on Monday, largely an extension of post-payrolls demand, dissipated in US hours as weaker US data took the shine off the renewed greenback optimism. USDJPY was the most impacted following the data, as has regularly been the case in recent times given the sensitivity to US yields.
  • Lower than expected final S&P PMIs set the tone for the pair, with the downside move gaining traction through the overnight lows and then extending to an intra-day low of 139.25 on the significant miss for ISM services index (52.4 vs 50.3 est.).
  • Bullish conditions remain intact with pullbacks appearing to be corrective at this juncture. Recent highs resulted in a test of the top of a bull channel, drawn from the Jan 16 low which intersects at 141.01 today and represents a key resistance. A clear break of it would reinforce bullish conditions and open 141.61, the Nov 23 2022 high. Key support to watch is 138.20, the 20-day EMA.
  • Overall, intra-day changes across G10 currencies have been limited with the Swiss Franc marginally outperforming and the Swedish Krona the biggest laggard.
  • Both EURCHF and USDCHF are hovering near their worst levels as moderate haven demand has been bolstered by the dip in major equity benchmarks in late trade. CHF outperformance comes following the broadly in line May CPI data and the release of the latest sight deposit figures. With EURCHF maintaining its downtrend over the past two months, the focus remains on the May lows at 0.9672.
  • The focus on Tuesday will be on the RBA meeting/decision where analysts remain evenly split over whether the board will vote for a 25bp rate hike or keep rates unchanged at 3.85%.
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