The US dollar is delivering a mixed performance across FX majors, with USD/CHF retaining a strong bullish structure while momentum on USD/JPY begins to fade. CHF/JPY may provide an additional clue, as its countertrend rally approaches a resistance cluster that could favour renewed Swiss franc outperformance against the Japanese yen.
View recent analysis
- Gold Holds Firm Despite Stronger US Dollar and Hawkish Fed
- US Dollar Rallies on Hawkish Fed Hike, Though Upside Could be Limited
- Yen Bulls Bruised by BOJ, But Intervention Could Prove Them Right
- Australian Dollar Outlook: AUD/USD Retraces Ahead of Jobs, Trump–Xi Summit
USD/JPY and USD/CHF Divergence Comes Into Focus Near CHF/JPY Resistance
Earlier this week I made a case that the upside of the US dollar index could be limited over the near term, even though the weekly chats suggested there may be plenty of demand. The mixed performance across FX majors this weeks continues to back this up, though that doesn’t necessarily mean we’ll witness a decent pullback on the USD before another bout higher – unless a suitable fresh catalyst arrives.
Source: ICE, TradingView
Looking across the FX majors on the daily chart shows a mixed performance for the US dollar.
- EUR/USD and GBP/USD nudged their way to an eight-day low, but downside volatility is lower than during the selloff that took them into their minor consolidations last week.
- AUD/USD tested 71c after two shooting star candles, but is yet to fully roll out of bed. And this is despite hawkish comments from RBA Governor Bullock.
- NZD/USD managed to form a volatile bullish outside day, though its open-to-close range was around a third of the day’s total range – and likely serves more as a warning to bears than a signal to bulls. The Kiwi dollar is arguably overextended, and it required predictably hawkish comments from the RBNZ to manage what it did.
- USD/JPY has formed a solid bounce in line with my bullish bias from the lows around 153. But note that Monday’s bullish inside day had a range less than half that of the prior day, with much of the move occurring in the upper wick. That was followed by a small-ranged doji, pointing to a loss of bullish momentum.
- USD/CAD is the standout performer as the Canadian dollar continues to buckle under trade headlines and growth concerns.
- USD/CHF has retraced lower for a fourth consecutive day, but given its solid bullish structure overall, it could appeal to bulls over the near term – even if its upside may be limited.
This content was created by an affiliate of FOREX.com and represents the views and opinions of the author/speakers, not the views and opinions of FOREX.com, StoneX Group Inc., or its subsidiaries. The content has not been independently reviewed by FOREX.com.
USD/CHF Technical Analysis: US Dollar vs Swiss Franc
The daily trend structure on USD/CHF is bullish to the point that it resembles a stock market more than a currency. A strong rally has formed from its lower trend channel since August, though its four-day pullback is losing momentum and hinting at a swing low.
Tuesday’s doji found support at the 10-day EMA and high-volume node (HVN) from a prior congestion zone. The monthly R1 pivot point and 0.7156 high are nearby as potential support should the retracement extend over the near term.
But with such a solid trend structure and bullish US-CH two-year yield differential, I’m on guard for another leg higher over the near term and a return to the cycle highs. A break above the 0.8262 high would also clear the monthly R2 pivot and assume trend continuation.
Source: ICE, TradingView
USD/JPY Technical Analysis: US Dollar vs Japanese Yen
The Japanese yen is worth keeping an eye on, as its depreciation may not sit well with the Ministry of Finance. And with USD/JPY having recouped over 500 pips of its latest 750-pip post-intervention decline, bulls may want to tread with caution from here.
Even if this doesn’t prompt another excessive move to the downside, the current rally is showing signs of losing steam. Friday’s bullish range expansion had a large upper wick, accounting for around half of the day’s range. It also respected the 158 handle, 50-day EMA and monthly pivot point.
The four-hour chart shows a potential continuation triangle, so perhaps there’s room for another spike higher. But with the weekly pivot also near 159, upside could be limited. And a pullback could be due.
Source: ICE, TradingView
CHF/JPY Technical Analysis: Swiss Franc vs Japanese Yen
You’ll notice that I have a near-term bullish bias for both USD/CHF and USD/JPY. However, with the Swiss franc seemingly the safer bet against the US dollar than the Japanese yen, the bounce on CHF/JPY could be limited.
Notice that the daily chart shows bullish momentum waning around a cluster of prior highs and lows, while the monthly S1 pivot is near the 194 handle. Swing traders could either seek evidence of a swing high or use CHF/JPY as a relative-strength chart to choose between USD/CHF and USD/JPY setups.
Source: ICE, TradingView
