USD/CHF Forecast August 3, 2015, Technical Analysis

The USD/CHF pair broke down during the course of the session on Friday, but as you can see found enough support in the region of 0.9550 to turn things back around and form a massive hammer. This massive hammer should be indicative of a move higher as a break above the top of it should send the US dollar heading towards the 0.98 handle, the next larger timeframe resistance barrier. We have no interest whatsoever in selling, because we believe that the 0.95 level is essentially the “floor” in this marketplace. This of course will be helped buying the Swiss National Bank shorting the Swiss franc.

Keep in mind that this is essentially a measure of North America versus Europe, as the Swiss are so heavily dependent on the European Union for exports. In fact, the Swiss send 85% of their exports into the European Union, and that means that the two economies are highly correlated, as the Europeans are the largest customer. With the problems in Europe that we see recently, this of course hurts the Swiss economy and as a result it makes sense that the US dollar continues to strengthen against the Swiss franc.

Everyone knows that the Federal Reserve is looking to do at least one interest-rate hike, and as a result it makes sense of the US dollar continues to strengthen against most currencies. On top of that, the US dollar is considered to be a bit of a “safety currency”, even though it should be said that the Swiss franc is as well. Under normal circumstances, we believe that this pair would be a lot more sideways in anything else, but with the present situation in Europe, it makes sense that the Franc would be shunned at the moment.

Short-term pullbacks will continue to be buying opportunities as well, and as a result this market should continue to be one that you can buy and buy again. Either way, we believe that through the volatility this market should prove to be relatively positive going forward, especially considering that the central bank is behind some of the movement.