USD/CHF Daily Outlook Jan. 19, 2012

By: Christopher Lewis

USD/CHF fell for the session on Wednesday as traders sold off the Dollar in general. The market seemed quite happy during the session, and that almost always seems to mean bad news for the Greenback.

The USD/CHF has been in a nice grinding uptrend for several months now. The pair has a lot of reasons to rise, and not all of them have to do with the United States or Switzerland directly. For example, the Swiss send over 80% of their exports to the European Union, and as that area is going into recession – they won’t be buying Swiss goods in as much quantity as before. This certainly will have some kind of negative influence on the Swiss economy.

Also, the Swiss National Bank continues to fight against Franc appreciation, and the EUR/CHF is rapidly approaching the 1.20 “floor” that the entire world is watching. If the SNB has to intervene, this will weaken the Franc overall, and this pair won’t be any different. The USD/CHF would rise rapidly if the Franc gets sold by the central bank.

Another thing to keep in mind – the US economy is actually growing. This is one of the few major economies that show reasonable expansion at the moment, and this will always attract money to the stock markets as the world seeks growth. Also, there is the US Treasury market, which also gets a lot of capital inflows in times of fear.

Still Showing Strength?

The recent fall in this market is still after making a new high, and as long as we don’t make a new low, this will simply show a pullback – something that would be welcomed and expected. The 50 day EMA (blue) is just below, and this pair seems to like to hang around between the 20 and 50 EMA in general. The 0.93 level is also just below, and that area is the spot of a massive breakout recently that was also retested and confirmed as support. Because of this, I am ready to buy this pullback on any signs of support, especially around the 0.93 handle. I will use shorter time frames to enter, and am fully aware that this uptrend will be a grind – not a sprint.