The Canadian dollar rallied against the Swiss franc in the early hours of Tuesday, as traders continue to look for yield, as the swap is positive. However, this is a market that is now pressuring a massive resistance barrier.
CAD/CHF
The Canadian dollar rallied against the Swiss franc early on Tuesday to break above the 200-day EMA but has since been repulsed by that massive technical indicator. The 0.58 level just above there is also resistance so I think we are at a point of significant inflection.
If we were to fall from here, then it opens up the possibility of market participants really starting to sell into this position. If we fall from here, I think a retest of the 50-day EMA is still in order and I think at this point we have to look at this through the prism of risk appetite. This situation we find ourselves trading in continues to be difficult, and therefore position sizing is crucial as well.
The Influence of Risk Appetite and Oil Markets
If risk appetite continues to get hammered, it does make a certain amount of sense that the Swiss franc is favored above the Canadian dollar. After all, the Swiss franc is considered to be a safety currency and the Canadian dollar of course is one that is a bit of a risk appetite-based currency, especially considering that the oil markets are so influential.
That being said, I believe the market is going to continue to see volatility, choppiness, but if we were to break above the 0.58 level that could change things and it could open up a move to the 0.59 level followed by the 0.60 level. This is a market that will move right along with risk appetite, but we also have to pay attention to how other markets are moving, especially the interest rate markets. If interest rates start to jump again that's typically going to be bad.