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USD On The Ropes, USD/CHF Enters Corrective Territory

Posted Monday, September 17, 2018 by
Shain Vernier • 2 min read

It has been a challenging open to the trading week for the Greenback. Losses against the Euro, British pound and Swiss franc have highlighted the session. The USD/CHF continues the weakness of early September, with price putting in a hard test of the .9600 level. The pronounced downtrend has taken the USD/CHF into corrective territory.

Trade war rhetoric is the likely culprit for today’s poor performance from the USD. Friday’s announcement of $200 billion in tariffs on Chinese exports to the U.S. seems to be creating angst among USD bulls. It is a bit of a surprise that the markets view fresh tariffs as bringing a new dynamic to the table — haven’t extensive tariffs already been priced in?

As a reference for coming FED actions, the CME FEDWatch Index is assigning a 94% chance of a rate hike next week and a 79% chance of a December move upward. These are bullish signals for the Greenback. However, currency traders are taking a pass on the USD in favor of the Swiss franc.

USD/CHF Technical Outlook

The past seven sessions have been tough for the USD/CHF. Values have fallen beneath the 38% yearly retracement for 2018 (.9732), a signal that the long-term uptrend is under fire. Trade has been sustained beneath this level for a week. As of now, the USD/CHF is entering correction.

USD/CHF, Daily Chart
USD/CHF, Daily Chart

For the immediate future, there are two technical levels on my radar:

  • Resistance(1): 38% Retracement 201’s Range, .9732
  • Support(1): Psyche Level, .9600

Overview: The USD/CHF is pushing daily lows beneath the yearly 50% retracement. This is not a huge issue at the moment, but the 62% retracement level is on the horizon. In the event we see concerted selling, this area may come into play later in the week.

With few areas of support present, the USD/CHF may be poised to test the big round number of .9500 very shortly. In the event that it does, trading opportunities will be abound. Be sure to stay tuned to FX Leaders throughout the week for ideas on how to trade the Swissie as well as the other forex majors.

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