FX Minors: Current Market Trends & Covid-19 / U.S. Elections

In this analysis, we take on the Swiss Franc (CHF) versus the Brazilian Real (BRL) to gauge the prevailing sentiment in the FX markets, in the context of U.S. Presidential Elections uncertainties around the U.S. Dollar (USD), as well as the diminishing in importance of Covid-19 globally & a generalised overextension of major currencies to the upside against FX minors (such as the BRL, HUF , PLN, HRK & so on).

A short sell-off in this CHF/BRL pair is particularly significant due to the 'safe-haven' quality of the Swiss Franc in comparison to the rather fragile Brazilian Real, which is interesting when we consider the underlying fundamental factors driving such a move, less influenced by a strengthening in the Real, but rather a global cooldown in the pandemic situation, which favours baby steps towards business as usual, portfolio diversification & a healthy profit-taking / opportunity-seeking in the markets.

When we take into account the dramatic moves to the downside across all FX minors, a global recovery from this pandemic does imply some gradual increase in demand for minor currencies such as the Real, which in turn also means the nearing of supply levels for major currencies, as the need for 'safe havens' diminish inasmuch as the generalised fear of abnormal global conditions gives way to a slow return back to normality.

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