High conviction trades: buy USD/CHF - Westpac

Analysts at Westpac offered their high convictions trade.

Key Quotes:

"Our model, macro and technical inputs maintain a buy USD/CHF signal for the week ahead. Last week’s bullish scores for USD/JPY and NZD/USD both remain in place too but the strength of the signal has moderated and the buy on weakness recommendation is removed.

Continued deflationary reads on CPI and repeated comments from SNB members that they are content with NIRP and would be willing to add to negative rates if needed should see the SNB maintain its policy stance. The sanguine response to the Italian referendum has not resulted in any safe haven flow, leaving CHF with a persistent negative bias. We buy USD/CHF at 0.9995, stop 0.9890.

Conviction levels have eased across most currencies (see this week’s overall scores vs last week), underscoring a general consolidation profile from last week’s stronger signals. Take the USD for example: our score remains bullish but at +2 it has moderated, the USD is now very well owned, the Fed seems unlikely to fuel a fresh leg up next week with a hike fully priced and we appear to be in a Trump fiscal easing news vacuum until his 20 Jan inauguration.
Total return 2016 calendar year to date: -4.05%. Total return since Nov 2014 inception: +4.46%."