The USD/CHF pair is a market that has been interesting over the last couple of sessions. After all, the Swiss National Bank changed its policy as far as negative interest rates are concerned, imposing them on financial institutions that had recently been exempt. This was seen as a loosening of monetary policy on Wednesday, but Thursday saw the market come back in and take back all of the gains in the US dollar. With this, we find ourselves testing the 0.95 level again, which of course is rather significant.
This is the area that has been so supportive lately and as a result I find supportive candles in this area very interesting. But when you look at the longer-term chart, another picture starts to emerge: we could possibly be trying to form a bit of a descending triangle. That’s a very bearish formation, and I find that very interesting considering that it almost defies logic at the moment.
Watch the triangle, but don’t be blinded to what’s going on
Watch this triangle, and quite frankly I think if we can break down below the 0.94 level, you have to assume that we are going much lower. However, don’t be blinded by the fact that the formation is there. After all, we can break the top of the triangle downtrend line in that inning of itself is a buying opportunity. If that happens, I think the market will more than likely head back to the 0.98 level, followed very quickly by parity. Remember, this pair is considered to be the polar opposite of the EUR/USD pair, so if that pair falls, this pair should rise.
I also would be very cautious as to how the markets react to various comments by Swiss central bankers, as they certainly command a lot of attention. This was National Bank has been one of the more aggressive central banks in the world, and find themselves in a bit of a pickle with the European Union being in so much trouble. Nonetheless, watch this formation and trade accordingly.
