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Over the last several years, the US Dollar has been the dominant currency with factors like an improving economy and the potential for higher interest rates adding to the bullish outlook.  The positive momentum has pushed the USD to some of its highest levels in recent memory, so  it is time to assess whether or not the market is due for some sort of correction.  One indication that this might be occurring can be seen when we look at recent activity in the USD/CHF, which has once again fallen below the parity level.

Chart Outlook:  USD/CHF

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Chart activity in the USD/CHF shows largely positive over the last year, as markets pushed higher from declines to roughly 0.90 last May.  Safe haven buying activity has decreased in the Franc over this period but valuations are currently below the parity mark that is often viewed as an important psychological level in the forex arena.  This will likely be interpreted as a positive sign for the CHF and we are now looking at a next support level of 0.9660.

By CornerTrader

Central Bank Expectations

Whether or not this activity can continue will largely depend on the changing central bank expectations at both the US Federal Reserve and the Swiss National Bank (SNB).  Rate increases are less widely expected from the SNB if we are looking at interest rates futures, so there is still scope for the Dollar to rally if we do not see and significant changes.  The longer term trends in the Dollar suggest that most of the market still believes this to be the case, with the USD gaining.  

Forex traders will now start looking to the pair’s next support level at 0.9660.  We will probably see some buying activity initially in this area, but stop losses below if bears are able to make enough of a push.  So far this year, the edge has gone to the CHF, with the USD/CHF pair falling from highs well above parity.  Technical support and resistance levels will play a key role in the short term trends going forward, as there are some relatively obvious historical levels that will attract and deter traders.  The first support zone to watch comes in at 0.9660, while resistance overhead can now be found at 101.40.  Both of these levels can be used to initiate short term positions in the USD/CHF over the next few weeks.