Remaining Short on USD/CHF, on Hawkish SNB
Skerdian Meta • 2 min read
USD/CHF has been bearish since November last year, as the FED started sounding less hawkish and the USD retreated lower. On the other hand, the CHF has benefited from the uncertainty and has rallied as a safe haven. Moving averages were acting as resistance on the H4 chart during the decline, although in May we saw a reversal as USD buyers started to come back and moving averages turned into support. But, this month the sentiment has changed and sellers are back in control, which means that MAs as acting as resistance again. Last week the 200 SMA (purple) turned into resistance, while this week the 50 SMA (yellow) has taken up that job.
Yesterday USD/CHF opened with a bearish gap and soon after the Asian opening, it made an attempt to break above the 0.8970 level but failed to close the gap and the selloff resumed again, sending the price down to 0.89 lows, where it has formed a support zone. So, there was a slight bearish bias yesterday, which suggests a potential resumption of the main bearish trend, with the next targets at 0.8850 followed by 0.8820.
Although we saw a reversal and a climb higher to 0.8960 in the US session, where we decided to open a sell USD/CHF signal. The 50 SMA (yellow) was acting as resistance on this timeframe, so we decided to go down with the flow. A bearish bias is expected today too, supported by the downward pressure indicated by the 50 SMA (yellow). It’s worth noting that if the pair manages to break above 0.8980, it would invalidate the negative scenario and potentially lead to a return to a corrective bullish track.
Although, the downside is more favored for this pair, as the Swiss National Bank (SNB) sounded pretty hawkish in the last meeting after raising rates by 25 basis points (bps), despite a drop in core inflation below 2% year-on-year.