CAD-CHF is Waiting for a Catalyst

By: Mike Kulej

During the last year, we witnessed some currencies posting strong gains in relation to the US Dollar. There were all time price extremes reached, followed by stern warning from central banks, that their currencies have unfairly appreciated, sometimes threatening action.

CAD-CHF Trends February 3, 2011

Both the Swiss Franc and the Canadian Dollar found themselves in this position and developed an interesting relationship. For the last half a year the CAD-CHF have been locked in a 700 pips wide trading range, between the parity level defining the top and about 0.9300 at the bottom.

What Are They Waiting For?

This particular pair is clearly waiting for a catalyst of some sort in order to force it either way. It could be an interest rate change by one of the central banks, particularly good (or bad) employment number, a surprise in GDP data or another one of market moving events. Whatever that might be, the price will give an unmistakable signal by moving out of the trading range.

In the meantime, the Stochastic Indicator can provide some good trading opportunities. For as long as the CAD-CHF remains between 1.0000 and 0.9300, this indicator is likely to mark tops and bottoms by being respectively overbought and oversold. It was designed for this type of trading environment. 

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