UBS has recommended investors to short the USD/CHF pair, citing attractive entry levels for the trade. The firm pointed out that the DXY index, which measures the US dollar’s strength against a basket of currencies, has decreased by 1.5% from its peak in late April due to disappointing US economic data.
Despite the Federal Reserve’s hawkish stance and indications that it would require several months of moderating data before considering rate cuts, the US dollar is facing conflicting pressures. While the Fed is maintaining a tough stance on monetary policy, economic indicators in the US are showing signs of deterioration.
UBS advised a cautious approach and suggested being selective in making directional trades with the dollar. This strategy aligns with the current economic climate, where mixed signals are coming from policy makers and economic data.
In addition to recommending a short position on USD/CHF, UBS also disclosed that they closed their long position on another currency with a marginal gain. This decision reflects their response to changing market conditions and their ongoing evaluation of currency valuations.