USD/CHF Forecast December 30, 2011, Technical Analysis

The USD/CHF pair originally rose during the session on Thursday, but fell later in the day as the Italians managed to get the auction off on their 10 year bonds. The yields were at just under 7%, but after auction trading in the secondary markets had the yield break back over the 7% level again. Because of this, there was a run to the US dollar in general for a few hours during the session.

However, as the Euro didn’t completely implode, the Dollar was sold off, and it was no different in this pair. The Swiss Franc got a bid – probably in covering by traders as opposed to any real conviction to buy it. The 0.93 level was the scene of a strong breakout recently, and the level was the launching pad for the latest surge upward as support was confirmed. The level will more than likely hold as support again as it is the scene of serious strength from all accounts.

The thin markets probably exaggerated all moves, and the selloff in this pair is probably nothing of consequence. The 0.93 level will more than likely attract more buyers who have missed the initial upsurge. The Swiss Franc is actively being worked against by its own central bank, and as a result it isn’t a favorite currency for traders to hold.

The US dollar is currently enjoying both a stronger US economy in relation to other economies, and the safe haven status that it holds. With both of these factors working for the Dollar, it is hard to sell it at the moment as there are so many headline risks out there. Also, the Franc in particular isn’t appealing, so a grind higher makes sense in this pair.

Switzerland has the unfortunately liability of sending 80% of its exports to the European Union, which will be entering recession if it isn’t already in one. This in combination with a strong Franc is going to hurt the Swiss economy going forward as well. Because of this, the Franc is more than likely far overvalued at this point. We are buying this pair on dips going forward, expecting a grind higher – not a sprint.

USD/CHF Forecast December 30, 2011, Technical Analysis

Written by FX Empire