Looks Likely to Break Out

If we were to break down below there, we had plenty of support all the way down to the 0.90 level, and we have been in a longer-term range that has used that area as a floor for a while.

• The USD/CHF pulled back a bit during the trading session on Monday, only to turn around and show strength yet again.
• It is currently threatening the 50-Day EMA, and it ended up forming a bit of a hammer.
• While this could end up being a “hanging man”, if we break down below the bottom of it, the reality is that we’ve seen a massive shot higher, so I think this is what you need to start thinking about buying dips.

Advertisement

It’s also worth noting that the 0.91 level underneath has been supported multiple times in the past, so I think it’s worth looking at that as an area of potential interest, and therefore could be a bit of a floor in the market. If we were to break down below there, we had plenty of support all the way down to the 0.90 level, and we have been in a longer-term range that has used that area as a floor for a while. Add to that the fact that the Federal Reserve now must deal with much hotter employment than people expected, people start to look at the Federal Reserve as being typed for much longer than anticipated as well.

Interest Rate Differential Favors the US Dollar

On a break above the 50-Day EMA, I think your first target is the 0.94 level. Anything above that opens the possibility of challenging the 200-Day EMA, which is currently hanging about the 0.95 level. After that, then you start to hang on for a move to parity or so.

As far as selling is concerned, you could make a short-term trade to the downside on a break below the bottom of the candlestick for the Monday session, but I think it’s probably going to be short-term at best. That would not be a huge surprise though, since everything is short-term anymore, as we do not have huge macro swings like we used to just a few years ago. The economic cycle has been nothing short of a headache for most traders, and the noise is going to continue to get much more deafening than it had been in the past. Interest rate differential still favors the US dollar, so that’s probably something that we need to pay close attention to over the longer term. At this point, it’s just a matter of trying to find a good price for the greenback.