The market has liquidated large amounts of short USD positions over the course of the morning, rumoured to be as much as 20 yards if you add up the cable dividend rumours, the wobbly US hedge fund rumour, and the "other" large British clearer rumour. Add to that talk of one of the major banks shutting down quotes on some major currency pairs on its electronic portal, and you have to assume that a good amount of dollars have already been purchased, even if the cumulative above is an overstatement (or not).
In such an environment one would have expected USD/CHF to have been able to hurdle 1.2100 and pressure topside stops, the former it did, the latter not. 1.2105 was the top, a smidgeon over yesterday's highs, and if USD/CHF cannot run topside on a day like this you have to question when it can, or examine the reasons why it didn"t. EUR/CHF pressured its all time high, hitting 1.6465 at the peak, and is still trading above 1.6460; GBP/CHF rallied back to 2.4165, up 80pts on the day, before sliding back to 2.4145; CAD/CHF hit new 5-mth highs at 1.0837, and CHF/JPY has slid back to 99.00 from 99.24. Net on net a weak Swissy on the crosses, so lack of dollar strength is not due to lifting of cross trades.
So what can it be? Well objectively the bulk of the "dollar" positions kicking around are in EUR/USD and other majors (like cable), there just isn"t much point running short USD/CHF at negative carry unless you have to. Secondly, a brand new EUR/USD highs today, and before the dollar bears give up on the trend they will want to give it some breathing room. All eyes are on next week, and how EUR/USD behaves, if the fund manager calling for a top over this week is right, it could become very interesting.
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