The Good Friday holiday contributed to a quieter trading day, but the FX market still experienced notable activity. The dominant trend was selling of the USD.
USD/CHF saw a decrease of another 35 pips. The pair remains in the middle of the weekly range after touching a 10-year low last Friday. It is consolidating near those lows, with a noticeable lack of a bounce-back.
Market Expectations
There are expectations for developments in US trade negotiations over the long weekend. It is advisable to remain alert for any updates.
With USD/CHF showing limited movement away from recent lows and continuing to hover near a 10-year bottom, we see a market hesitant to reassess value to the upside just yet. There’s little in the price action suggesting a reversal. The absence of any attempt to regain lost ground is telling. Traders have refrained from taking aggressive positions ahead of expected updates on economic discussions, implying that many choose to wait on the sidelines rather than take new directional bets.
Looking beyond spot FX, option pricing has not adjusted significantly, which suggests that the market does not yet anticipate high volatility in the immediate future. Still, from our position, we should not dismiss the probability of sharper shifts post-weekend, particularly if headline drivers surprise. It pays to remember that extended weekends can delay rather than reduce market impact – events do not pause merely because trading hours are shortened.
In recent sessions, there has been steady demand for safe-haven currencies in Asia, but those moves were restrained in scope. Swiss franc buying has continued, though at a pace more consistent with passive flows than panic-led repositioning. When these moves coincide with multi-year chart levels, as they now do, more attention is merited.
Market Positioning and Strategy
Now, with markets consolidating and large moves off the table in the short term, the incentive may lie in recalibrating exposure rather than overcommitting capital. Volatility term structures remain shallow. Implied vols are lower than historical ranges by a wide margin, implying that option market participants currently expect muted movement. From our angle, it is precisely during such periods of lower premiums that buying downside hedges or defining risk-reward becomes more affordable.
Powell’s last remarks gave little reason to alter rate expectations, and any changes in trade policy outlook must materially shift sentiment to now reprice the greenback. Until that happens, patience is more prudent than prediction.
Should we see US data prints surprise, especially in inflation or employment, these could jolt the dollar out of its current drift – not necessarily reversing the ongoing trend, but injecting some life into flattening charts. Until that materialises, keeping a short bias intact has made more sense, particularly when momentum is largely one-directional and supported by broader cross-asset themes.
Recent surveys and flow data still reinforce this directional tilt. Institutions holding longer dollar positions have gradually trimmed exposure, especially versus currencies like the franc and yen. If capital continues to back away from these stretched dollar positions, we may witness further mild depreciation even in the absence of fresh catalysts. It’s worth highlighting that when positioning is no longer stretched and FX volumes remain thin, moves tend to become more responsive to headline triggers.
At this stage, it’s more about timing than direction. Flows into options closer to the money, coupled with the decline in premiums, allow traders to define downside more clearly without needing perfect entry points. As individuals react to digestible catalysts after the holiday break, we’ll likely observe more meaningful reaction to news than the price action would otherwise imply.
For now, with most pairs stationary within their recent ranges, playbooks should remain structured around measured exposure. Setting tight parameters and quick execution becomes essential, especially during thinner hours post-holiday.
