USD/CHF: Levels, Ranges, Targets

Swiss overnight rates ranged 4 points, 0.23 to 0.27 from February 2017 to February 2018. Overnight Swiss Money trades ranged 0.11 from minus 0.18 to 0.05 while 3 Month Libor ranged from 0.25 to 0.27. Libor OIS is located far below as is the norm for financial price protection at 0.01. From above, as the BOE finalizes its new system in April, welcome to the new GBP, welcome to the new DXY when US markets close. Markets are heading to interesting developments.

The purpose for USD/CHF as it trades in small ranges is to maintain a location to trade below EUR/USD and GBP/USD but above AUD/USD and NZD/USD. Against USD/CAD and USD/JPY, USD/CHF ranges trade below both. Not a problem exists in USD/CHF as it operates correctly but it lacks range and ability for the big move. As a market instrument, USD/CHF follows rather than leads. From the SNB perspective and due to a small economy, USD/CHF just wasn’t designed to move.

USD/CHF hit its break point yesterday at 0.9520 and fell. USD/CHF 0.9520 remains the big break point today in order to travel higher. Higher in USD/CHF retains a sincere problem as not only is the 5 year average located at 0.9559 but many breaks point exists in 0.9500’s as follows, 0.9518, 0.8542 0.9562 then 0.9598 and 0.9600. Above the 5 year average is located the 10 year at 0.9788.

The only break points below are located at 0.9436, 0.9409 and lower means USD/CHF leaves its multi year range. USD/CHF overall is slightly oversold but oversold means targets are located at 0.9488, 0.9509 and 0.9550 to inform the 5 year average won’t break anytime soon unless USD/JPY and USD/CAD travel higher.

Why slightly oversold is because USD/CHF trades directly around its break points and many exist from 0.9500’s to 0.9800’s. Higher for USD/CHF will be a tough and slow grind.

To see higher volatility and range expansion then 0.9784 and 0.9788 must break and 0.9784 is located the 10 year average.

Below 0.9784, USD/CHF will remain a slow mover inside short ranges. USD/CHF at 0.9400’s includes slow mover and short ranges. On the way above 0.9559 is next major breaks at 0.9633, 0.9646 and 0.9667 then the 10 year average at 0.9784.

To compound short ranges is USD/CHF’s position as low to near perfect neutrality to inform dramatic moves and ranges will continue into the future.

USD/CHF 0.9445 decides the break point fate at 0.9520 as USD/CHF above then the shot exists to break. A break at 0.9520 then USD/CHF gains speed higher. Below 0.9445 then 0.9429 becomes the focus. Oversold and long positions should look at 0.9377 to 0.9359 to target back to the break at 0.9445.

Overall, USD/CHF is a range rather than trend currency and its intended character to trade as a range currency pair won’t change anytime soon unless the SNB redesigns its monetary policy away from 3 month Libor as its multi decade standard.
Brian Twomey

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