By: Christopher Lewis
The USD/CHF pair has seen resurgence over the last several sessions as the bulls have taken back control of the market. The recent bounce from the 61.8% Fibonacci retrace of the uptrend. The area was just below the 0.90 level as well, so we saw a bit of interest at that point and the move came in with real strength.
However, the pair retraced the breakout from Wednesday during the Thursday session. The move for the day looks basically like a classic “retest” of the resistance level as support going forward. (The 0.9250 level.) The pullback should have been somewhat expected as the Dollar has seen so much strength lately, and as you know markets simply can’t run in one direction forever.
However, I look at this move as a pullback, and not a continuation of the downward move. The main reason for this is that the Swiss economy is so overexposed to Europe, while the US economy continues to grow. The interest rates in the US Treasury markets are starting to climb slightly, and because of that we should see a continuation of Dollar bullishness.
Looking forward
The top of the session for Thursday represents a buy signal for me. This is mainly because it would confirm that the pullback on Thursday was just that – a pullback. If we don’t see that level broken to the upside, there is a chance that the pullback really is going to be a fall in price.
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The Swiss National Bank continues to work against the value of the Franc on the whole, although not necessarily in this pair directly. The EUR/CHF is their real concern, but any intervention in that pair will also send this one higher. The fact that the Swiss are so aggressively working against their own currency, and the fact that the markets for the Franc are far less liquid than other currencies, I can’t be bothered to argue with the SNB.
I will be going long on a break of Thursday’s highs, and if we fall from here, I will also look for support at the 50% or 0.90 levels. I also expect 0.92 and 0.91 levels as offering potential support as well. There isn’t a situation that I can think of at the moment that has me selling this pair.