Dollar breaks down against Swiss franc

Kate Leaman Kate Leaman

21 June 2019

Swiss Franc forex trading

While you weren’t looking, and in all fairness most people weren’t, the US dollar has broken down against the Swiss franc. That being the case, there is a potential target based upon a technical pattern on the chart. Attached to this article, I have the weekly chart you can see that we have clearly shown signs of extreme negativity.

Rising wedge

usdchf weekly chart

USD/CHF Weekly Chart

The weekly chart has formed a massive rising wedge, one that was broken out of a couple of weeks ago. We did bounce back to test the bottom of that wedge and have now broken below the weekly candle from that test. That’s a very negative sign, and it means that we should see some type of continuation. If we can get that continuation, this market could very well find itself reaching down towards the bottom of the rising wedge, which is just above the 0.95 handle.

Federal Reserve

The Federal Reserve struck a dovish tone in the most recent presser, which of course is negative for the US dollar. Because of this, we have seen the US dollar fall against multiple currencies, so you can pin this on the Fed directly. That being said, there are other reasons to think that this pair could fall considering everything else that’s going on.

Global drivers

That being said, one of the reasons this pair may end up falling rather significantly is that the global situation is hardly one to be excited about. We currently have trade tensions between the United States and China, as well as tensions between the Iranians and the Americans. That in and of itself could cause a lot of fear out there and that is generally good for the Swiss franc. Marry that with the idea of a dovish Federal Reserve, and you can see that you have a bit of a perfect situation here for the safety of Switzerland that come into play.

Target

typically, the target is based upon the bottom of the rising wedge once it breaks down. That gives us about 300 pips, which is a sizable move in the Swiss franc. The Swiss franc is a very stable currency, and typically CHF related pairs will show that. Ultimately, if we were to turn around and break above the 1.00 level, then we could negate all of this. However, with everything that’s going on this is probably one of the most obvious moves that happen in the Forex market.

We are approaching short-term support, so a small bounce could be expected. That being said, it should offer an opportunity to sell this market again. Don’t be surprised at all if it takes a couple of months to reach this target, because the Swiss franc doesn’t typically move that fast, and it is summertime of course which will typically slow the entire market down anyway. That being said, if we can break down below the 0.95 handle, we could have something big on our hands. Remember, this pair is the “antithesis” of the EUR/USD pair. That one is rising, so this one should fall.


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