USD/CHF Forecast January 10th, 2012, Technical Analysis

For the last week or so, the market has been talking about the Swiss National Bank’s Chairman Phillip Hildebrand, and the scandal surrounding him. It turns out that a day or two before the now famous “floor” the central bank put at 1.20 in the EUR/CHF pair, Mr. Hildebrand’s wife decided to buy the pair to make roughly 75,000 CHF. Against this backdrop, he resigned during the Monday session.

While the markets will have to decide what this means, a lot of the initial chatter had people selling the USD/CHF, EUR/CHF, and most currencies against the Franc. However, it was shortly after that the Swiss National Bank announced that the policy of a floor at 1.20 in the EUR/CHF was intact. With this in mind, it created a selloff in the Franc during the US session.

The US dollar fell against most currencies however. The USD/CHF pair specifically fell the most, and this is probably just as much to do with the Dollar weakness rather than this news unfolding. In fact, the reaction in several other pairs was very short-lived and we feel that the situation hasn’t changed over all.

With this in mind, we are still bullish of this pair even with the weak candle printed for the Monday session. The 0.93 level was a site of a massive breakout that happened recently, and the pair looks like it should see support at that level. The area looks like a place where we might be able to look for supportive candles as this pair continues to grind higher over time. The move up shouldn’t be thought of as a quick one, rather something that will happen over time. We have recognized that the pair is going to struggle once it gets to the 0.95 level as it is a big area in the overall direction of the pair for the long-term.

We are still willing to buy on dips, and the pair will continue to offer buying opportunities as the grind higher will be due to the fact that the Swiss National Bank will continue to work against the value of the Franc, and the Swiss will go into recession as the Europeans struggle to deal with the faltering economy. When your biggest customer is broke, you can’t sell much – as the Swiss are about to find out the hard way.

USD/CHF Forecast January 10th, 2012, Technical Analysis

Written by FX Empire