The USDCHF is retesting session lows after weak GDP data from the US hit the markets. Preliminary data showed a quarterly contraction of the US economy by 5.0%, which was higher than the 4.8% contraction seen last quarter and also projected for this quarter by market analysts.
The disappointing GDP data and initial jobless claims which struggled to please forced USD bulls to back off from the initial price push earlier in the London session and put the pair firmly on the path to the downside, even as the US-China tensions continue to escalate. A New York Times report is said to indicate that the US government may cancel the visas of thousands of Chinese researchers and students with connections to universities affiliated to the Chinese army,, in a move that could widen the scope of the tensions between both countries. This situation seems to have benefitted the safe-haven Swiss Franc in the short-term.
The USDCHF is now trading at 0.9668, or -0.11% as the pair continues its march to the downside.
A look at the daily chart shows that today’s price action hit the resistance at 0.97139, and faced price rejection on the back of the news of the US economic contraction. The dip in price seems to have found support at the lower border of the triangle, very close to the 0.96535 support line. This border has limited the drop for the moment.
Going forward, the price action seems right for a break of the triangle, having moved more than the 60% threshold distance from the base to the apex of the triangle.
If the USDCHF breaks down the triangle on the back of safe-haven demand for the Swiss Franc, we could see a further decline towards 0.96274 and possibly 0.95496, with 0.94963 and 0.94324 coming into focus if the decline is extensive.
On the flip side, a bounce of the pair on the present support and subsequent breakout of the pair above 0.97139 could allow the pair target the 0.97793 resistance level, with 0.98116 and 0.98562 lending themselves as targets for the bulls if USD strength prevails.