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The USD/CHF pair rose for much of the week but pulled back to finish lower. The resulting candle is a shooting star, and suggests that we could see a bit of a pullback at this point. However, we have the 0.90 level below that looks very supportive at this point, and we think that the market will run into massive support and buying there.
The Swiss National Bank is continuing to work against the value of the Franc, albeit in the EUR/CHF pair. The pair has a floor in it at 1.20, and the market in that pair seems hell bent on testing that level. With this in mind, intervention could happen much quicker than many people think. If this happens, the USD/CHF pair will rise with it.
The Swiss also have the misfortune of exporting 80% of its exports to the European Union. The EU will find many of its members in recession in the near future, and this will certainly work against the Swiss economy. The Franc will certainly pay for this, and buying it isn’t interesting to us at this point because of this new dynamic.
The pair will find that the 0.95 level seems massively resistive, and should continue to keep this pair in the range for the short-term. However, over the longer term, we feel that the parity level could be seen in this market. The flow of money from Europe should continue, and this will include Switzerland on the whole. Granted, the Franc is thought of as a safe haven, but it also has intervention risk, which dampens that feel for traders.
The Dollar on the other hand represents one of the few large economies that are growing, and should continue to appreciate because of it. The move is countertrend, so we expect a lot of pullbacks, and only those that are patient should be buying this pair. We like buying on supportive signs closer to the 0.90 handle, and breakout above the top of this week’s shooting star as it shows strengthening momentum.