The US dollar is surging higher against the Swiss franc currency this week as improved risk-on trading sentiment causes traders and investors to shun safe-haven currencies and move into riskier currencies, such as the Australian and Canadian dollar.
With risk sentiment remaining at elevated levels, it looks like the Swiss franc currency could be headed for more losses against the greenback and other currencies. We should expect strong technical buying while the USDCHF pair trades above the pivotal 0.9000 level.
The ongoing meltdown in the Swiss franc has not been limited to the greenback. The Swiss franc has been aggressively sold against the British pound currency this week, and to a lesser degree the euro currency.
With risk-on sentiment returning and commodity-related currencies rallying this could be the start of a new uptrend in the USDCHF pair. Typically, when commodity markets start to rally from risk-on sentiment the cycles can last for a long time before they start to ease and become mature.
The old correlation of EURUSD weakness and USDCHF strength is also starting break down as the so-called mirror relationship is currently not in play, which is particularly noteworthy.
There is a clear correlation between safe-haven currencies being sold, as both the Swiss franc and the Japanese yen are the biggest losers on the foreign exchange market this week. Again, watch for this trend to accelerate as market optimism increases.
In terms of technical, the USDCHF pair broke above its 200-day moving average for the first-time since March last year yesterday. This is a big deal as investors and traders watch the 200-day moving average closely to determine whether a currency is technically bullish or bearish.
The ActivTrades Market Sentiment tool shows that some 56 percent of traders are bullish towards the USDCHF pair. Bullish sentiment is not at elevated levels, so traders do not currently worry about the latest move being overheated.
Should we see market sentiment starting to turn more bearish while the USDCHF pair moves higher then caution is advised as the powerful new short-term and medium-term price trend may be just starting.
USDCHF Short-Term Technical Analysis
The four-hour time frame continues shows that price has broken above the neckline of a large bullish inverted head and shoulders pattern, which is found around the 0.9040 level.
According to the overall size of the inverted head and shoulders pattern the USDCHF pair is headed towards the 0.9200 resistance level over the short-term horizon.
Source By ActivTrader.
Additionally, the MACD indicator on the four-hour time frame is positive, alongside the momentum indicator. These are both very positive signs in the short-term.
USDCHF Medium-Term Technical Analysis
Looking at the daily time, the big event on the chart is the break above the 200-day moving average as mentioned earlier. If bulls can perform multi-day price stabilization above this level then further gains should be expected.
Another positive sign is the technical breakout above a falling price channel, which is now well on its way. The USDCHF pair could start to rally towards the 0.9300 and possibly 0.9400 resistance area over the medium-term.
Source By ActivTrader.