By: Christopher Lewis
The USD/CHF pair has been overly bullish as of late, and the action on Wednesday was one of the first signs of a let up. The recent action in all of the Franc related markets has been heavily influenced by the Swiss National Bank and its “floor” in the EUR/CHF pair. Because of this minimum rate of 1.20, the pair cannot fall too much more, which by extension means that the Franc cannot appreciate in general. True, it can rise against some currencies, but in order for it to truly take hold – the EUR/CHF will have to fall much more.
The Dollar will continue to be the safe haven of choice, as it always has. However, the Franc won’t enjoy this status as the SNB will make it so. Because of this, I prefer to be long of this pair overall as it simply makes more sense.
Pullback
The pair looks primed to have a pullback over the next couple of sessions. The candle formed on Wednesday shows up as a doji, and this shows me that perhaps the cluster of orders between the 0.91 and 0.92 levels will act as resistance for the meantime. However, this in my opinion will not hold overall.
.png "USD/CHF Daily 3/8/12")
The recent bounce is from the 61.8% Fibonacci level, and this is a common occurrence in a move. In fact, I prefer to see a pullback like this as it shows that there has been plenty of value added to what is obviously a decent move. The fact that the level pretty much coincides with the 0.90 level as well makes me even more convinced that the uptrend shall continue.
In the short term, this pair looks likely to pullback and I believe this is simply a great opportunity to jump back on this train. The 0.90 level should continue to offer support, and I also believe that the 0.91 level could be supportive as well. Because of this, I am waiting to see some kind of supportive action in either of these spots to buy. However, there is also the possibility that we rise and breakout before a pullback, and I would consider the pair entering the 0.93 level as confirmation of continuation as well. I still think 0.95 and parity are seen by the end of the year.