CAD/CHF Daily Outlook - Dec. 20, 2012
The CAD/CHF pair fell during the majority of the session on Wednesday, as we broke below the 0.92 handle at one point. Because of this action, it looks at first like we were going to continue the run towards the Swiss franc.
Granted, we haven't exactly switched the trend to the upside, but the fact is that we formed a good-looking hammer by the end of the trading day. This looks like we could get a bit of a bounce for the short-term, and this could be relatively strong for the Canadian dollar in general. After all, it is a "risk asset", and as such this could be good news.
However, I think that this may be more of a reaction to the Euro than anything else. If you look around the Forex markets, the Euro got absolutely beat up later on in trading. Shooting stars abound in the Forex markets when speaking of the Euro, and as a result it does look like the Euro is going to plunge a bit going forward.
I believe that the Swiss franc is being punished because of its proximity to the European Union. After all, the Swiss depend heavily upon the Europeans for their export market, so it follows that the Swiss economy would suffer if the European Union is going to suffer as well.
I believe that this candle is simply a sign that were going to bounce for the short-term, but we should expect some type of sell signal above. How you handle this trade is completely up to you, but I personally believe that a short-term buy could be placed on a break of the highs, and a reversal of that trade could be placed us as we start to see serious signs of weakness, probably around the 0.94 handle.
Going forward, this isn't always the most popular pair to trade, but it is a good barometer for the risk appetite of global markets. On the other hand, if we managed to break the bottom of the hammer for the Wednesday session, this pair should absolutely come undone and fall rapidly.
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