Dollar climbs vs franc
By Arnaud Masset
Despite threats of a USA-China trade war, traders have built long USD/CHF positions as the currency pair increased 4.4% since mid-February. In today’s Asian session the dollar lost some ground against the Swissie, easing to 0.9576 from yesterday’s high of 0.9597, but this is a consolidation, not a retreat. The pair is testing the 200-day moving average resistance at 0.9658 with momentum firmly positive. Trade tensions have NOT triggered a rush to safe havens. Investors believe there is substantial hot air in the war of words.
Given the positive options market, together with the increase in CHF shorts, there is a good chance that resistance will break to the upside. The 25-delta risk reversal has continuously improved across all maturities since mid-February. The 1-month rose from -1.18% to -0.62% yesterday, while the 6-month jumped from -1.36% to -1.03%. Latest speculative positioning data from the Commodity Futures Trading Commission puts CHF net shorts at 21% of open interest, up from 10% last week.
Germans bought less in February
By Vincent-Frédéric Mivelaz
Yesterday’s February retail sales disappointed, coming in negative at -0.70% instead of an expected slight gain. Private consumption has declined for three months in a row, and this is the key contributor to economic growth. Nonetheless, consumer confidence is firm, unemployment is at historic lows (5.30%) and wage growth accelerated 4.3% in Q4 2017. So we remain confident that private consumption will recover and that retail sales data must be taken with a grain of salt.
The euro continues to appreciate against the USD, currently at 1.2265 and expected to head toward 1.2254 short-term. There’s been an increase of US non-commercial long EUR futures, equivalent to 141’064 or 60% of total long open interest contracts, so expect to see continued pressure on the greenback.