USD/CHF Turns Bullish

TheAustralian dollar was the main focus of today’s Asian session as the Chinese Services’ PMI survey and the Reserve Bank of Australia meeting were two key risk events.

The aussie was relatively volatile against the US dollar, as it dropped from the 0.9335 level where it traded during Monday’s New York close to 0.9316, but then rebounded to around 0.9340.

Starting with the Chinese Services’ PMI number, this fell to a 9-year low during July as it dropped from last month’s 53.1 to 50. This triggered some concerns that the Chinese economy may be slowing down more than was originally thought. However, more data is probably needed before reaching the conclusion of a Chinese slowdown and trade figures as well as inflation later in the week will be closely watched.

As expected, the Reserve Bank of Australia kept its key interest rate unchanged at 2.50%. It was one year ago that the RBA decided to cut its key interest rate to this record low level and according to futures markets, it could leave this rate unchanged for the next 12 months as well. The RBA’s message was one of stability regarding interest rates as it does not expect higher inflation or wage growth and housing is expected to continue to expand. The RBA maintained its criticism of the Australian dollar saying that it was high by historical standards – particularly given weakness in key commodity prices. Overall it looks like the aussie will not receive much help from the Australian central bank as rates appear stable for the foreseeable future and the bank is ready to criticize any advance of the currency. Still, the economy’s fundamentals look relatively better than other developed economies.

Looking ahead, business surveys will be the focus of attention for the remainder of the day as final Eurozone PMIs will be released, followed by UK Services’ PMI and then Markit and ISM Services’ PMIs out of the United States.

USD/CHF turns bullish

The USD/CHF turned bullish after crossing above its 200-day moving average on July 15. The rally continued to a high of 0.9105 on July 30.

The short-term bullish momentum remains positive as long as support at 0.9035 holds. This is the July 28 low. The break of resistance at 0.9105 will accelerate a move higher to target 0.9155, the January 19.

On the daily chart, the tenkan-sen and kijun-sen are positively aligned and price action is above the Ichimoku cloud, adding to the bullish market structure. RSI and MACD are both in bullish territory.