Swiss Franc Rebounds As AUD and USD Selloff Continues

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Despite the lack of confirmation, additional Dollar weakness lies ahead, as the near-term trend is reversing. However, in the event of more Dollar depreciation, the Australian dollar would be a currency to avoid. Given its relative strength against the Euro and Sterling, the Swiss Franc is more likely to be a better option than not.

On the other hand, the Swiss franc appears to be strengthening ahead of the traditionally volatile August. EUR/CHF continued its decline from 1.1149 to 1.0740. The oversold state of the daily RSI is not slowing it down, but the daily MACD is suggesting a downside acceleration.

The current focus is on support for the 1.0737 clusters (61.8% retracement from 1.0505 to 1.1149 at 1.0751). Strong trading below that level this week will pave the way for a retest of the 1.0505 low. And, in any case, the short-term outlook will remain bearish as long as support at 1.0802 holds resistance.

Last week’s selloff in the dollar drew a lot of attention, but it eased down at the conclusion. Traders are hedging their bets, for the time being, expecting the release of the July statistics. Indeed, the Australian Dollar was the weakest performer, owing partially to risk aversion in China and Hong Kong and partly to RBA QE predictions. The second-worst currency was the New Zealand Dollar, which was followed by the US dollar.

AUD’s Underlying Vulnerability

Australia is to publish Monday’s AIG Manufacturing Index for July and Commonwealth Bank’s Manufacturing PMI for the same month. The Reserve Bank of Australia will announce its monetary policy decision on Tuesday, and investors are looking forward to another dovish stance from Lowe & Co.

The Australian currency was the worst, with AUD/USD ending the week at 0.7330, as the country’s ongoing virus problem kept the Aussie off investors’ attention. The CAD sank against the greenback as well, but only after hitting new highs against its American counterpart.

The AUD/USD pair is down for the fifth week in a row and modestly lower weekly. The pair fell on Friday, pulled down by the gloomy tone of global indices. Since the country adopted local restrictive policies that hampered economic expansion, the Australian dollar has been unable to attract purchasers. Gold prices are falling, putting more pressure on the pair at the end of the week.