- The USD/CHF has rallied a bit during the trading session on Thursday to break above the 0.95 level again, suggesting that we are going to reenter the consolidation area that we have been in for a while.
- The 0.94 level underneath has been supported more than once, just as it has been resistant.
- Ultimately, this does suggest that we may have bottomed, at least temporarily. Keep in mind that the Swiss National Bank has probably done about everything it’s going to do as far as tightening is concerned.
- The market is likely to continue to see more of the same massive range-bound trade that we admitted.
The 200-Day EMA sits at the 0.9650 level, which could offer a significant amount of technical resistance. On the other hand, the market is likely to continue to look at that as a major barrier, but one that could be overcome. If we turn around and fall from there, then we would pull back to the 0.94 level. Breaking above it then allows the market to go looking to the 0.98 level. Above there, then you have the parity level which makes a lot of sense as well.
Volatility Ahead
Keep in mind that there has been a major selling to US dollars as of late, which means that the attitude of the greenback and the idea that the Federal Reserve is going to keep tightening may have slimmed a bit. All things being equal, you should also keep an eye on the fact that the SNB remains very loose, even though it had tightened previously. Quite frankly, one of the biggest problems that Switzerland faces is that it is surrounded by the European Union. With that, I think it will continue to go up and down with the fate of the European Union in general.
I do believe that we continue to recover, and at the very least we need to work off some of the oversold condition, we could see a bit of a ripping rally. This will be especially true if there is a lot of fear out there, and a rush back into the US dollar as a result. Keep in mind that interest rates in America are infinitely higher than in Switzerland and will remain so. Expect volatility, but I believe the 0.94 level is a major support level.
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