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USDCHF forex analysis
The US Labour Day federal bank holiday today means there should be few US dollar flows, which in turn would allow other market participants to move the markets.
The US dollar index had risen higher since the June FOMC meeting, as the market perceived the Federal Reserve turned more hawkish. This continued sentiment was backed up by the FOMC members that came out over the following weeks talking up the case for a tapering of asset purchases as early as this year.
The delta variant disruptions have also caused some key commodity prices to weaken which was supporting a higher US dollar price. Macro data in August came in weaker across many economic indicators and following the Jackson Hole symposium the market has clearly started to unwind the long US dollar position, with attention turning to a weakening US and more importantly, global growth outlook.
Last week we were monitoring the depreciation of the Swiss franc that saw the EUR/CHF recover to resistance around the 1.0800 level. The Swiss franc probably benefited from further interventions in the currency market by the Swiss National Bank given the persistent deflationary risk. The SNB is still likely to indicate its willingness to intervene further in FX markets should this be needed to counter any unwarranted upward pressure on the CHF.
The USDCHF sentiment indicator on the ActivTrader platform is showing quite an extreme level of bullishness towards the US dollar, which in this instance I am having to agree with them. Generally, I am counter trend to this indicator so if I were to take a long position, I would either like to see these traders get more neutral to bearish, or I’d take a smaller than usual position.
The US dollar today is relative strong against all of its peers in the forex heatmap with the Swissy one of the weakest along with the New Zealand dollar.
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I like the daily chart for the USDCHF as there was a clear positive divergence in the MACD to price, which then resulted in an impulsive move higher. Using the Fibonacci extension tool there is a good chance we could see the 0.9600 level as that would be a measured move from the base of this deep retracement. The current levels are a corrective wave, so looking for a breakout to the upside and the start of the next impulsive wave. In Elliot wave terms it could be the 3rd wave of a larger wave 3, so a very impulsive move higher is to be expected, if that is the case.
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The M30 chart for the USDCHF shows the neat descending channel with price coiling around the moving averages. What would be good for the bulls to see is a breakout and retest of this channel before trading the continuation. Whilst price is within this channel it is a reversion to the mean trade or for those that don’t like getting chopped up on false breakouts etc., the channel indicates when to step aside.
