- Both currencies considered a “safety currency”
- U.S. dollar continues to get bid due to U.S. treasuries
- Significant volatility expected
The U.S. dollar continues to be very choppy against the Swiss franc, which of course makes quite a bit of sense considering that the global economy is tenuous at best. Beyond that, there are a lot of geopolitical concerns out there, so money running into the safe havens makes complete sense. As both of these currencies are considered to be safe havens, it makes the action in this market very noisy.
The technical analysis
The technical analysis for the pair has to be seen from a longer-term perspective, even if you are not looking to trade longer-term charts. While this is generally true, it’s especially true now that we have such choppy conditions. One of the easiest ways to look at the overall trend is to pay attention to some of the more basic moving averages. On the chart, there is the 50 day EMA, which is red, and the 200 day EMA, which is black.
At this point, both moving averages are pointing lower, suggesting that we are going to go lower, especially considering we have the so-called “death cross” in the market, with the 50 day EMA crossing below the 200 day EMA back in June.
While the market is very noisy, one can also observe that each successive high has gotten lower. The lows are starting to slow down, but having said that, we are starting to see a bit of resistance near the 50 day EMA during trading on Wednesday. Ultimately, this makes a certain amount of sense, because you need to keep in mind that different parts of the world will use different currencies for safety.
With the noise coming out of the European Union and the Germans going into recession soon, there will be a significant amount of money flowing into Switzerland, even though they offer negative yields.
The fundamental analysis
Not only are the Germans throwing money into Switzerland to protect it, but there are also several people around the world throwing large amounts of money at the U.S. Treasury markets. This gives the U.S. dollar a certain amount of strength. However, it’s likely that we are going to see the Swiss franc continue to strengthen, mainly because money is flowing into Switzerland.
The trade going forward
The pair is more than likely going to continue to find exhaustion every time it rallies. With this, looking at short-term exhaustive candles such as shooting stars offers opportunities to buy the Swiss franc, shorting this pair. While shorting the U.S. dollar against most currencies doesn’t make sense right now, this might be one of two exceptions at the moment, including the Japanese yen. Currently, it looks like this pair is trying to return to the 0.97 CHF level. Above, there is significant resistance at the 0.99 CHF level.