Patience will be needed in order to realize the outcome of the trade as this pair does tend to move very slowly most of the time.
The US dollar has shown quite a bit of back-and-forth trading over the last couple of weeks, with the area near the 0.91 level offering support down to the 0.90 level. As the USD/CHF currency pair has tested this area multiple times, it is worth paying attention to the fact that we could not break down through there.
- Recently, the Swiss National Bank has had to bail out Credit Suisse, and there are concerns about further contagion through the banking system.
- Beyond that, the Swiss economy is highly levered to the European Union, which of course has its own set of issues.
- The market will continue to look at this through the prism of Switzerland sending 85% of its exports into the EU, so therefore as Europe goes, so does Switzerland.
That being said, there is a little bit of a safety play when it comes to the Swiss franc for traders, but you can say the same thing about the US dollar. With that being the situation, eventually a lot of people will start to look at the overall global situation as one that demands trying to take care of their wealth. The 50-Day EMA sits just above the 0.94 level, where we have seen previous resistance. Just above there, the 200-DA EMA sits, and therefore it could be a bit of a short-term ceiling for this market.
Breaking above that opens up the possibility of the dollar returning to the parity level against the Swiss franc, which I do believe eventually ends up being the case. The 0.90 level underneath is a gateway to lower pricing, which would more likely than not be accompanied by lower US dollar pricing across the board. While that does not look easy to do, we have dipped below the 0.90 level as recently as July 2021. Furthermore, when you look at longer-term charts, 0.90 level typically does bring in value hunters, and therefore I would look for them to return yet again. It’s also worth noting that we had seen a massive impulsive red candlestick several weeks ago, but since then have seen more of a grind back and forth, showing that perhaps the market has run out of a lot of its momentum. Either way, patience will be needed in order to realize the outcome of the trade as this pair does tend to move very slowly most of the time.
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