USD/CHF rose to the upside on Wednesday as the 0.93 level proved to be supportive yet again. The area was the site of a breakout a couple weeks ago, and we suggested that it should continue to support the pair going forward.
The Dollar had a good day in general as the flight to safety continued. The Swiss Franc is struggling as the Swiss National Bank has been actively jawboning and plotting against the value of the currency. The export markets for Switzerland are having a hard time buying Swiss goods as they have become so expensive.
The European Union is most certainly going into recession this year if it isn’t already. The Swiss export over 80% of their goods send abroad to the EU. With that in mind, it is hard to see that the Swiss economy won’t suffer going forward. At the same time, we see the Dollar as strengthening going forward on two fronts: The lack of certainty going forward, and the fact that the US economy is actually showing signs of life recently. All things being equal, it would make sense that the pair should continue to rise over time.
The pair does face some major headwinds above however. The 0.95 level is a massive resistance point, and it is actually the 50% retrace of the fall from the most recent plunge. The area looks like it will take serious strength to get through, but the fact that the pair continues to grind higher over time and refuses to sell off tells us that there is real interest in this pair going higher at the moment.
Having said all of this, the pair closing above the most recent high just above the 0.95 level would signal that we are going to continue up and out of this recent consolidation range. At the moment, we are buying dips in this pair as the fundamentals are starting to look better and better for the US dollar, and the Swiss seem to be painted into a corner because of their neighbors.
Written by FX Empire