USD/CHF may have bottomed, but could US stock markets spoil the party for bulls?

The USD/CHF was the first major dollar pair to show strength this week and it has been the first to turn higher post FOMC...

The USD/CHF was the first major dollar pair to show strength this week and it has been the first to turn higher post FOMC. Most of the other major USD pairs have all given up their sharp gains after initially rallying hard on the back of a dovish policy statement from the Fed. As I warned in my EUR/USD piece earlier, most of the bearish news might be in the price now for the dollar. Although it is far too early to call this the bottom for the greenback, against her weaker rivals like the Swiss franc it is certainly looking strong at the moment. If tomorrow’s GDP data doesn’t show a big miss then the US currency could make a more profound recovery.

Ahead of the US GDP data, the USD/CHF has made back its entire losses from last week, creating what could be a bullish engulfing candle on its weekly chart, barring a surprise sell-off on Friday.  On the daily chart, one can see that it has created what looks to be a false breakout reversal pattern at 0.9445, the 2016 low. Since that fake out, it has reclaimed the broken 0.9555 support level and moved above intermediate resistance around 0.9595-0.9620 area. Once resistance this area could turn into support, leading to a continuation in the rally. A break above the most recent swing high at 0.9700 would mark a break in market structure. We need this condition to be met to fully complete the technical reversal pattern, although judging by what has happened so far in the week, this looks almost inevitable.

One thing that could see the Swiss franc come back to life is if we see a marked deterioration in risk appetite. This afternoon, US stock indices sold off heavily, led once again by tech names. If the losses sustain themselves then we may see a sharp rise in perceived safe-haven assets. However, from a purely technical perspective, the USD/CHF looks like it may have bottomed out

Source: eSignal and

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account