- The USD/CHF pair drops only because the DXY is in a corrective phase.
- We could search for new long opportunities when the retreat is over.
- Making a valid breakout through the WL2 could confirm a larger upwards movement.
Our USD/CHF forecast sees the pair dropping in the short term only because the Dollar Index has retreated. There is a strong positive correlation between these two.
Still, you should keep in mind that the corrective phase could be only a temporary one. Personally, I’ll look for new buying opportunities when the current retreat is over.
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Fundamentally, the Swiss Franc received a helping hand from the Switzerland Trade Balance which was reported at 5.65B above 4.90B expected and compared to 5.01B in the previous reporting period.
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The Dollar Index is into a corrective phase. A deeper drop should force the USD to depreciate versus its rivals, versus the other major currencies, and not only versus the CHF. It remains to see what will really happen after the US data.
The Unemployment Claims indicator is expected to drop further, from 267K to 260K which will be good for the greenback. Also, the Philly Fed Manufacturing Index could grow from 23.8 to 24.2 points, while the CB Leading Index may register a 0.8% growth in October versus only a 0.2% growth in September.
USD/CHF Forecast: Price Technical Analysis – Dynamic Resistance
The currency pair is traded at 0.9263 level at the time of writing and it challenges the weekly R1 (0.9265) level. Unfortunately, it has failed to stabilize above the second warning line (WL2) of the descending pitchfork signalling that the sellers are very strong in the short term.
Testing and retesting this dynamic resistance could bring short-term selling opportunities. After this corrective phase ends, we can search for new long opportunities. Personally, I would like the rate to come back towards the 38.2% retracement level before starting increasing again.
From the technical point of view, USD/CHF’s decline was somehow expected after its last swing higher. The currency pair could extend its upwards movement after jumping and stabilizing above the second warning line (WL2). The current drop could be considered to be a down channel, a flag pattern which may represent a bullish continuation formation.
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