The CAD/CHF pair isn’t one I focus on a lot, but it could be a good “back door” way of playing the CHF strength, or central bank intervention later.
CAD/CHF
Looking at the Canadian dollar against the Swiss franc, you can see that we are approaching a pretty significant support level in the form of 0.56. 0.56 is a large round psychologically significant figure, but more importantly, it is the scene of a double bottom.
Previously we had seen the Swiss franc weaken, but now it is starting to swallow a lot of currencies. The US dollar has broken down against the Swiss franc, and I would postulate that's probably the second most important currency to measure the Swiss franc against, the first one being the Euro, mainly because 80% of Swiss exports end up in the European Union.
But the Swiss franc's quoted against the US dollar. So, when you get into more outlier currencies like the Canadian dollar against it, it is very interesting to watch this because it can give you a little bit of a heads up as to where the Swiss franc is going. It is interesting that we are testing this resistance just like we were against the US dollar, and I think if we break down below 0.56, while Canada is not their biggest concern, it's another sign that we are getting closer to Swiss National Bank intervention.
The Euro Influence
That will definitely be a thing if the Euro starts to soften up, but the Euro has had a pretty good day. So, I think at this point, Switzerland can play the game where they are okay with a stronger franc against Canada, a stronger franc against the dollar, but when it comes to the Euro, all of these pairs are going to rip higher.
So, watch this 0.56 level, but if you want to trade this pair, and I do like this pair, keep an eye on the Euro against the Swiss franc as well because if that gets too negative, it's time to bail.
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