USD/CHF eases to fresh session lows near 0.9950 on risk aversion

• Markets started the week on a cautious tone.
• The US Dollar Index fails to recover back to the 95 mark.
• Risk perception is likely to stay as the primary driver in the remainder of the day.

After staying relatively quiet during the Asian trading hours, the USD/CHF pair gained traction in the European morning but lost its momentum before reaching the critical parity mark. With investors staying away from riskier assets, the CHF gathered strength against the buck and the pair was last seen trading at 0.9946 where it was down 0.3% on the day.

Concerns surrounding the global trade conflict took control of the price action on Monday as China responded by imposing tariffs on American imports following President Trump's announcement last Friday. "China’s tariff announcement mirrors that of the US: a 25% tariff on $34bn in US exports starting 6 July with an additional $16bn targeted but on hold. The targeted product by China include agricultural products and autos,” Nomura analysts explain.

The flight-to-safety caused the Japanese Nikkei 225 to close the day 0.75% lower. Meanwhile, Germany's DAX and the UK's FTSE 100 indexes are losing 1.45% and 0.35% respectively. Furthermore, major equity indices in the United States are also pointing to a negative start to the week, which could keep the pair under pressure in the remainder of the day.

On the other hand, the US Dollar Index, which started the day with a bearish gap, stays in the negative territory amid a lack of fundamental catalysts that could wake the USD bulls up.

Technical levels to consider

On the upside, 1.0000 (parity/psychological level) remains as the initial resistance. A daily close above that level could open the door for further gains toward 1.0055 (May 9 high) and 1.0095/1.0100 (May 10, 2017, high/psychological level). On the downside, supports could be seen at 0.9925 (50-DMA), 0.9880 (20-DMA) and 0.9790 (Jun. 7 low).