Potential signal:
- I’m looking for a buying opportunity in this pair at the 0.8275 level.
- I would have a stop loss at 0.81, aiming for the 0.85 level.
Recently, we have seen the Swiss franc strengthening against most things, including the US dollar. However, in the last couple of days there has been a lot more stability in the USD/CHF pair, so I think all things being equal, this is a market that will continue to be very choppy and noisy, but we are oversold by just about any way you look at it. The US dollar itself is oversold against almost everything, so the Swiss franc won’t be any exception here.
Swiss National Bank
While I don’t know anything other than recent past dictates this being a possibility, I would have to start to think about the Swiss National Bank, and what it may or may not do in the currency markets. When the Swiss franc it’s a little too strong, they will buy other currency such as the US dollar, and especially the euro. Again, it’s not like I know they’re going to do it now, but we are at extreme lows, so if there is a candidate for intervention, we have to see it coming fairly soon.
This makes quite a bit of sense, because the Swiss National Bank has been loose with its monetary policy and was one of the first out there to start cutting rates. When rate cuts don’t work, then manipulation is the way forward. The 0.8100 level is an area that I think a lot of people will be watching, as it has been important previously, and over the last couple of days, we have been faxing the US dollar to try to stabilize here. Bouncing from here could kick off a long opportunity, but right now I think we are probably more or less just trying to see whether or not the market can settle its nerves after this tariff spat that has almost everything behaving dangerously.
Position sizing will be crucial in all currency pairs, even this one, despite the fact that it is typically one of the slower moving pairs. Quite frankly, it only takes a tweet or an announcement at this point in time to have the markets flying off the handle and wiping out trading accounts if you are sized incorrectly.
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