The USD/CHF pair rose on Friday as the week had seen so many losses in this pair. Although the bounce came it was very weak, and even looks a bit like a shooting star at the bottom of a down move, which is often a continuation sign – we can’t sell this pair.
The biggest problem we have with this pair is that the 0.93 level was once serious resistance, and has been supportive several times since then. However, the weekly chart looks weak at the same time, and the pressure is certainly building against the Dollar in general now.
The other problem is going to be the Swiss National Bank. The Swiss National Bank is working against Franc appreciation, and has even put in a “floor” at the 1.20 level in the EUR/CHF pair. While this is a different market, if they sell the Franc against the Euro in an intervention effort, this pair will rise as well. (Something you undoubtedly saw a few months ago.)
Because of this, we aren’t too excited to sell this pair either, although the charts are screaming for us to do so. We are planning on looking at the 0.93 level for some kinds of support, and if we don’t get it, we are willing to walk away from this market now. The other side of a central bank intervention is no place we want to be, and there are plenty of non-Franc related pairs around for us to be involved in. However, if we get that supportive candle, we wouldn’t hesitate to go long of this pair.
The talk now is of the Fed doing something along the lines of quantitative easing in the future. Because of this, the Dollar could suffer for some time. The markets will try to get out in front of this, and it looks as if it has started. The chart in this pair looks horrible at the moment, but unfortunately we are going to have to pass as the dangers involved in buying the Franc are far too great with all of the chatter coming out of the Swiss lately.
Written by FX Empire