The US Dollar (USD) maintained a firm stance against the Swiss Franc (CHF), trading just above 0.7800 on Thursday, as investors awaited the outcome of US President Donald Trump's visit to China. The USD/CHF pair exhibited growing bullish momentum, supported by safe-haven flows due to the ongoing stalemate in Iran and rising US Treasury yields. Technical analysis indicated a falling wedge pattern, often a precursor to a bullish breakout, with the Relative Strength Index (RSI) around 56 and MACD lines slightly positive. Key resistance was identified at 0.7845, with further upside targets at 0.7930, while support levels were noted at 0.7760 and 0.7740 [1].
President Trump described the meetings with Chinese President Xi Jinping as 'fantastic,' highlighting positive and productive discussions. Xi Jinping echoed these sentiments, emphasizing stable ties and an in-depth exchange of views. At a state banquet in Beijing, Xi stated that the US and China should be partners, not rivals, and suggested that the rejuvenation of China and 'Make America Great Again' could proceed together. Trump called the visit 'historic' and invited Xi to the White House on September 24 [1][2].
Despite the positive diplomatic signals, the Australian Dollar (AUD) underperformed, trading down 0.25% to near 0.7240 against the USD during the European session. The AUD was the weakest among major currencies against the USD, even though improved US-China trade relations typically benefit the Australian economy due to its export reliance on China. The underperformance was attributed to broader USD strength, driven by expectations that the Federal Reserve will not cut interest rates this year amid accelerating inflation and higher energy prices [2].
On the domestic front, swaps indicated an 80% probability that the Reserve Bank of Australia (RBA) would raise interest rates in August, which would mark the fourth hike this year, as the RBA has increased its Official Cash Rate at every policy meeting so far in 2023. Meanwhile, US inflation data released earlier showed a stronger-than-expected impact from the energy shock in April, further boosting expectations of potential Fed rate hikes in the second half of the year [1][2].
CONCLUSION
The US Dollar's strength was underpinned by rising Treasury yields and expectations of sustained Fed hawkishness, while positive US-China diplomatic developments failed to lift the Australian Dollar. Market participants are closely watching central bank policy signals, with the Fed and RBA both expected to maintain or increase rates. Overall, the USD remains favored amid global uncertainty and robust US economic data.