USD/CHF breaking out?

With the Dollar Index breaking to a new 2019 high today and risk assets remaining generally supported, demand for haven assets has fallen further.

With the Dollar Index breaking to a new 2019 high today and risk assets remaining generally supported, demand for haven assets has fallen further. Gold has broken key support in the $1485 region, triggering a cluster of stops sitting below than handle to create panic selling. Meanwhile, the USD/JPY has remained above the 108 handle, thanks not only to a firmer US dollar, but a weak yen too with the likes of GBP/JPY and CAD/JPY rising. Meanwhile the other key haven currency – the Swiss franc – has weakened too, falling even against the yen. Consequently, the USD/CHF is one where the dollar bulls are eying closely for a breakout.

In fact, the USD/CHF has broken above the 200-day average again. Will it be third time lucky? In the previous two occasions, the breakout only lasted at most for a day, before selling pressure ensued. This time could be different given the widespread dollar strength and judging by the bullish characteristics of price action as well. On that note, the bulls will be pleased to see that Friday’s bearish engulfing candle completely failed to lure new sellers in. With the bears trapped now, any-test of Friday’s high around 0.9950 could see these participants cover their bets, adding to the buying pressure. So, 0.9950 is the most important short-term support level to watch now. But if this level fails to hold and price subsequently goes below Friday’s low at 0.9890 then in that case, the bullish setup would become invalidated again. But for now, the path of least resistance remains to the upside and a rally beyond parity looks imminent.  

Source: eSignal and City Index.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.