USD/CHF continues to grind sideways after a fairly quiet session on Monday. The pair did fall originally, but just like the session on Friday, it bounced to form a hammer above the 0.93 level. The level was the site of a breakout recently, and it looks very supportive at this point in time. The 0.95 level above will be resistive though, and this could lead to some fairly tight trading ranges in the near term. We don’t expect a lot of volatility in the short term, but certainly see potential for a move going forward.
The Swiss National Bank is currently working against the appreciation of the Franc, although the pair they focus on is the Franc versus the Euro. However, any action taken in that pair will plague the value of the Franc overall, and this pair is no different. With this in mind, while the USD/CHF pair can fall without serious repercussions directly, the odds that the Franc gains against just the Dollar are limited at best.
Using that knowledge to our benefit, we know that this pair has a bit of a “backstop” because of the SNB going forward. The 0.93 level is our first massive support area, and the 0.90 and 0.85 are even bigger in our minds. Because of this, we only buy this pair going forward.
Further adding to the buy side bias is the fact that there are a lot of headline risks out there, and the market is buying the US dollar in reaction overall. The strength of the Dollar is also predicated on the fact that the US economy is actually growing as a reasonable rate considering the situation worldwide. The European Union, China, and other parts of Asia are all experiencing a slowdown, and the Swiss are going to be hurt because of the EU recession that is coming. After all, Switzerland sends 80% of its exports to EU nations. With that in mind, it is hard to see how the Swiss economy does well in the near term either.
Because of all of the reasons above, we are willing to buy this pair on dips, and fully know that the move higher will be a grind and not a sprint. The 0.95 level will have to be closed above in order to get even more bullish, but we feel it is only a matter of time before this happens. Selling isn’t even an option at this point.
Written by FX Empire