- The US dollar initially dipped a bit against the Swiss franc, only to turn around and show signs of life.
- The market has tested the 0.84 level, which of course is a large, round, psychologically significant figure, and an area that we have seen action at previously.
- Quite frankly, I think we are getting close to a potential breakout but there is the 50 Day EMA sitting just above that could cause a few headaches.
- If we can break above that indicator, then it opens up the possibility of a bigger move.
Ostensibly, that would mean breaking above the 0.85 level, which obviously will capture a few headlines. That being said, keep in mind that we need a little bit more in the way of risk appetite to get the US dollar going higher, but the interest rate differential between the United States dollar and the Swiss franc are about a mile apart, so therefore you do get paid to hang on to this pair over the longer term.
All things being equal, we will continue to see a lot of volatility and I think this will be more of a grind to the upside, as we have seen so much in the way of questions about trade deals and the like. Keep in mind that the Europeans tend to throw money into Switzerland when they are feeling a bit more risk-averse, so therefore the EUR/CHF pair is very important to watch in reference as to what the Swiss franc will do. With the US dollar recovering, I do anticipate that sooner or later we will break to the upside.
Technical Analysis
The technical analysis for this pair is rather negative over the last couple of months, but if we can get above that 50 Day EMA, that’s the first real sign of a trend change. Quite frankly, I think the Swiss are going to lose their sense of humor when it comes to strengthening Swiss franc, so if we can break above that and the EUR/CHF pair starts to rally, I would be getting long in this market. If we fall from here, the 0.82 level should offer support, followed by the 0.81 level
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.