ridethepig | CHF Market Commentary 2020.06.05Clearly all the action has been in EURCHF after the enormous bids that came through into euro yesterday. Large macro players are liking what they hear from ECB and the Commission which is setting the stage for the EURCHF short-covering.
The key divergence can be seen in USDCHF breaking down, this isn't a CHF driven move but rather from the USD weakness. I am interested to chase this lower as risk sentiment begins to turn down again and CHF begins to find that safe-haven demand. Currently the outlook for CHF is firmly neutral, this can change as early as today's NFP.
How it behaves below the 0.950x handle will be thoroughly examined, the totally rigid cast around the risk rally is still part of a "KNEE JERK REACTION" phase from the initial crash. This means that markets will begin to start trading the facts around a recession and slow recovery. If any any doubts of the recession consider the following diagrams:
For a) see 2's 5's curve screaming recession
For b) , consider the unemployment levels
In this simplest of all positions, every other time this happened it ended badly for the economy. Assuming USD does not devalue materially into 2020 its repo will grow and continue expanding the balance sheet , one way or another eventually this is going to look like Fed has been financing the WhiteHouse and then the game is up. CHF appears in the FX desks to be starting to finally bow down to the boss, that is risk.
The blockader that is employment, is not flexible here and able to go on long journeys in all directions. The elasticity; should be kept in mind and used to analyse risk flows as such.
