CAD/CHF Daily Outlook - Nov. 28, 2012
The CAD/CHF is a pair that many of you will have rarely paid attention to. However, in a "risk on, risk off" type of environment like we find ourselves then, this pair makes a lot of sense to trade. On one half of the equation you have the Canadian dollar, which is of course a "risk on" type of currency, and on the other end of the equation you have the Swiss franc, which of course is the "risk off" type of currency. In its very essence, this is a barometer of how the market "feels" at the moment your trading it.
As you can see, the Tuesday session was bullish for the Canadian dollar, but we failed to hang onto most of the gains. Just below, we have a significant amount of support at the 0.93 level, but with the trend been so bearish I feel that this pair will eventually break down. This will be especially true if the oil markets are allowed to fall from where they stand right now.
You may not think of the right away, but the Middle East will be one of the greatest factors in this currency pair. This is because of course the idea of Canada being an oil exporter, while Switzerland is a safe haven destination. When times make traders nervous, quite often they will end up parking their money in Switzerland and as a result, the Franc is one of my favorite destinations for when trouble pops up.
With the recent tensions between Israel and Hamas, oil had enjoyed a little bit of a rally, but you can see that by the fall in this pair it has calm down and been reversed. I believe that a break below 0.93 will send this pair much lower, and continue the longer-term downtrend that we have seen since August. With this being said, I am simply waiting for that breakout that happen and to start selling the Canadian dollar. I would also pay attention to the USD/CAD pair, and if it starts to gain and breakout above the 1.0050 level, I believe that the Canadian dollar's weakness will certainly drag this pair down.
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