UBS recommended investors to short the USD/CHF pair, indicating attractive entry levels for the trade. The firm highlighted that the DXY index, which measures the US dollar’s strength against a basket of currencies, has declined by 1.5% from its peak in late April due to disappointing US economic data.
Despite the Federal Reserve’s hawkish stance, with officials hinting that it would take several months of moderating data before considering rate cuts, the US dollar is experiencing conflicting pressures.
On one side, the Fed maintains a tough stance on monetary policy, while on the other, economic indicators in the US are showing signs of deterioration.
UBS emphasized a cautious approach, advising to be selective in making directional trades with the dollar. This strategy aligns with the current economic climate where mixed signals are emanating from policy makers and economic data.
In addition to advising a short position on USD/CHF, UBS also reported closing their long position on USD/CNY, albeit with a marginal gain. This move reflects their response to the evolving market conditions and their ongoing assessment of currency valuations.
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