At the beginning of the year a flat trend in the range of 0.7371 - 0.7615 CHF was formed. Earlier, the rates were in the frames of a weak downtrend, which was characterized by high volatility, but eventually lost its intensity until January 2019. At the same time, the resistance line is still directed downwards, indicating the possibility of restoring the previous trend. However, the Swiss franc, weakened by the economic downturn in Europe, can hardly count on support, given also that the demand for safe assets has recently remained moderate.
Last week was a key one for investors. Everyone was waiting for the FED meeting and its results, as well as watching the process of negotiations between the US and China, which resumed these days. Investors were optimistic. So, the safe assets weakened a lot. Nevertheless, today everything began to return to its place: safe assets, including the CHF, received support after Donald Trump announced the introduction of new duties on goods from China. The franc began to strengthen against the Canadian dollar, despite the latest disappointing macroeconomic reports on the Swiss economy, which showed a sharp slowdown in inflation in Switzerland to 0.3% in July. In addition, the PMI index in the manufacturing sector fell for the third month in a row to 44.7 pips in June.
The Canadian dollar, which felt comfortable with the moderate growth in oil prices, fell sharply today, after the above-mentioned news about the introduction of new tariffs for goods from China. This made it clear that the US trade negotiations with China failed and the probability of an early end to the trade conflict tends to zero. Macroeconomic reports also did not contribute to the strengthening of the CAD, showing a slowdown in the Canadian economy and a slowdown in inflation.
We suppose that in the near future, the deals to SELL will be the most effective, as evidenced by the majority of technical analysis tools. In the medium term, it will be possible to open the deals to BUY, in anticipation of the recovery of oil prices, as well as new macroeconomic reports on business activity in Canada and the employment market, which can support the Canadian dollar. Entry points can also be noted at the levels 0.7371 and 0.7615 CHF, the achievement of which will signal the completion of the flat trend.
