By: Christopher Lewis
The USD/CHF market is one that is presently going through a metamorphosis. The pair has traditionally been one that saw the market fall as risk aversion increased. It used to be that the Swiss Franc was a currency that everyone wanted to own in tough times. While the UD dollar is also a “safe haven” currency, it was always less desirable to the Franc and Yen.
The recent action in the pair has been skewed by the fact that the Swiss National Bank has come out and put a “floor” into the EUR/CHF pair. The fact that the central bank could intervene at that level puts a floor in all XXX/CHF pairs by proxy. If the Swiss intervene in that market, this market will move in concert.
The pair then has been inverted. The Dollar suddenly finds itself a “safer” currency as the Franc can’t be bought below certain levels, and the most complicating factor is that it is at levels in a completely different pair. As a result, you have to pay attention to the EUR/CHF simultaneously when trading the US Dollar / Swiss Franc pair.
0.91 And above
The pair has found plenty of support at the 0.91 level, and this level goes all the way down to the 0.90 presently. The pop that the pair got was turned around without a doubt, but the fact is that the pair has had plenty of chances to fall below the support area lately, but has failed. With the EUR/CHF currently trading around the 1.2050 area, this pair will have limited downside. The upside will more than likely continue to be choppy, but the longer term safer bet.
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The 0.9250 level was the one that I was watching in order to go long, but the lack of a daily close above it keeps me flat at the moment. I am presently looking at the 0.91 level for supportive action yet again in which to buy this pair. I will not sell it as we are simply far too close to the supportive level, and also the area that will have the SNB selling Francs.