By: Christopher Lewis
USD/CHF is a quiet pair, and one that many traders are currently ignoring. The pair has a tendency to grind sideways for some time, only to move suddenly and go dormant for another protracted period. However, the pair is much different now than it has been traditionally, and as a result I believe there are serious trading opportunities in this market.
The Swiss are in a very precarious position at the moment. The European Union is the destination of over 80% of their exports, and their biggest customer is in serious financial trouble. A recession is coming, and some even think it will be severe. Granted, it will be different for each country, but the fact that the Franc is so strong isn’t going to help the situation. Because of this, the Swiss National Bank has a “minimum acceptable exchange rate of 1.20” in the EUR/CHF pair. While this pair is a completely different market, if there is intervention – this pair will shoot straight up as well. In fact, the XXX/CHF pairs will all do the same.
The fact that the EUR/CHF is currently so close to the 1.20 level currently puts a bit of a floor in all Franc-related pairs, and this one is no different. Besides, the US economy is doing better than most Western ones, and the Swiss economy will be no different. Also, the Dollar is now the de facto safe haven currency as the Franc and Yen are both being worked against.
0.91
The support area between the 0.91 and 0.90 levels seems to be very solid, and with the SNB willing to work against the Franc in general, it is going to be hard to buy it at these levels. There is obvious support in the neighborhood, so selling wouldn’t be a thought anyway.
.png "USD/CHF Daily 2/22/12")
With the two hammers in a row on the daily chart – we have an obvious bias to the upside in this pair. In fact, during the Tuesday session we saw a significant attempt to breakdown this pair by the Americans in the early part of the US session, only to see it turn around just as quickly. Because of this, I am looking to buy on a break of the highs from the Tuesday session, and think we could see 0.95 before too long.