Bottoming formation developing for USDCHF
Markets began the week nervously as trading opened in Australasia today with the main risk barometer, the S&P500, fell another 20 points while the US dollar was mixed. Following the Brexit vote, the Swiss National Bank said it had been active in the FX markets following the big move down in EURCHF (for more on the background to that see here: Swiss franc likely to become Brexit's collateral damage).
While the SNB’s main interest will be in supporting EURCHF, it will be hoping to see USDCHF rise as a side effect, helped on by a general move into the US dollar in a risk-off environment. As for the data calendar, Wednesday’s PCE inflation update out of the US will be the most important. A slight increase in the year-on-year core rate, perhaps to 1.8%, is expected.
Meanwhile in this post-Brexit vote world, the odds of a Fed rate hike this year are about the same as for a rate cut. Uncertainty prevails.
Management and risk description
My favoured Elliott Wave interpretation is that the dollar is in the early stages of a broad third Wave advance to the upside (see daily chart below) and whilst now holding 0.9590/0.9520 yields rally back toward 0.9955 (the late May peak for USDCHF), en route to the mid 1.0300’s.
Stop: 0.9729, initially.
Time horizon: Allow several days for target to be met.
USDCHF daily chart (click to expand)
USDCHF weekly chart (click to expand)
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— Edited by Robert Ryan
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