Short term
Trade view / 23 May 2016 at 3:10 GMT

USDCHF trend shows that broad USD recovery remains on track

Managing Director / Technical Research Limited
New Zealand

Sight deposits at the Swiss National Bank are holding steady this month, suggesting the SNB is happy with the current level of the exchange rate –  as well it should be after the rally in USDCHF and EURCHF in recent weeks. However, Swiss LIBOR is being held in a tight range around negative 0.75%, so as to not rock the boat.

Meanwhile, expectations for a June rate hike by the Fed have grown to 30% from only 4% earlier in the month. That may change a little this week when we see today’s manufacturing PMI and Wednesday’s services version, in an otherwise quiet data week.
Not much notice is likely to be taken of the Federal Open Market Committee members out on the speaking circuit again this week. They have all been signing from the same song sheet, which is that the June meeting will be a “live” one.

FOMC chair Janet Yellen appears on Friday at a Harvard event, where she is to be honoured and will talk about her “ground breaking achievements”. This is an unlikely forum for any guidance on monetary policy. A better opportunity will come on June 6. See more on that here: Watch for Yellen's June 6 speech to confirm rate hike.

Management and risk description

On its May 3 low of 0.9445, USDCHF completed a “double three” corrective structure (from an Elliott Wave perspective) and then last week saw the dollar complete its bullish descending wedge pattern (which has been forming all year; seer daily chart below).

The US dollar now has support about 0.9865/0.9840 and this will probably hold to yield the next leg of USDCHF’s recovery onto the late 0.9900s (i.e. Fibonacci 61.8% retracement resistance, of the prior 1.0330 - 0.9445 downtrend lies around the 0.9990 level), en route to 1.0255/1.0330 (i.e. wedge target at 1.0255 and 1.0330 last November’s 1.0330 peak).


Entry: Today, any dip to around 0.9875 is seen as providing another a buying opportunity.

Stop: 0.9833 initially.

Target: 50% at 0.9984 and 50% at 1.0238.

Time horizon: Allow several days/weeks for both targets to be met.

USDCHF daily chart (click to expand)
USDCHF daily chart

Source: ThomsonReuters

USDCHF weekly chart (click to expand)
Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more. 

For more on forex, click here.

— Edited by Robert Ryan

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Non-independent investment research disclaimer applies. Read more
23 May
goldfinger goldfinger
tks Max. I was just looking at what my re entry level should be.. any thoughts on euro£?
23 May
Max McKegg Max McKegg
My Stop now just above .7780
23 May
Vancouver Vancouver
max your us dollar call on this since the mid .9400's has been unreal! keep up the great work
23 May
goldfinger goldfinger


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