USD/CHF Forecast January 12, 2012, Technical Analysis

USD/CHF rose during the session on Wednesday as the pair continues to grind higher overall. The pair is the opposite of the EUR/USD pair essentially, and the movement is almost always inverse of that pair. The Dollar should continue to be favored overall in the currency markets and we feel that it will be so in this particular pair as well.

The USD/CHF has a few dynamics that set it apart from many other currency pairs out there. The Swiss National Bank is currently trying to weaken the Franc in general, although the biggest concern is against the Euro. The bank has set a “floor” in the EUR/CHF pair at 1.20, and this will continue to weaken the Franc in general. The Franc-related pairs will move in concert usually, so a move upward in that pair will be mirrored by this one and vice versa.

Another factor that is playing out in this pair is the fact that the Swiss send 80% of their exports to the European Union. The EU is expected to be in recession, and as a result the biggest customer of the Swiss is more than likely going to buy much less than the Swiss are used to. Now the real question will be if Switzerland goes into recession.

Adding to all of this, the US economy is actually doing reasonably well considering all of the global headwinds that are out there. Growth in the US and a contraction in the EU as well as Switzerland will continue to push the price in this pair higher over time.

It should be noted that the area we are in at the moment is just above the 50% retracement of the large move down, but the factors above should continue to push the pair higher, and eventually the fundamentals will dictate the technicals. The buying of this pair has been the only trade possible for a while, and we are buying on dips for the shorter time frames in order to churn out a nice profit. We also are interested in a long-term buy and hold position as well. We are willing to do that as soon as we get a large green bar, which would show real conviction.

USD/CHF Forecast January 12, 2012, Technical Analysis

Written by FX Empire