USD/CHF - Further Weakness Anticipated Towards 0.8800
USD/CHF may have printed a lower high at 0.9250 in the hourly timeframe yesterday, opening up the potential for a fresh break under 0.9115, towards our second target at 0.8945. Medium-term, scope remains for a return to the region near the 200 day moving average, currently at 0.8739.
The current daily structure of the Italian 10 year yield suggests that the swift pullback that we have seen from above 7.00% at the beginning of the year is likely the third leg of a larger corrective phase, with scope now for a near-term base and a fresh swing higher. We do however note that if a sustained hold can be maintained under the 50 week moving average, at 5.54%, then our bearish bias in USD/CHF will be negated in favour of renewed strength.
10 year yields in Spain and Italy are currently trading at 4.852% and 5.660% versus 6.478% and 7.355%, before the US Dollar based swap agreement. These same yields were trading at 4.957% and 5.947% respectively yesterday.