A Range Bound USD/CHF Makes Ideal Scalping Target

The USD/CHF has settled into a tight range as the pair has seen volatility quiet as concerns over the European debt crisis have eased. Improving U.S. fundamentals are providing confidence that the world’s largest economy’s recovery remains on pace and could potentially offset the impact from stagnating European growth. Nevertheless, the Swiss franc has tracked the Euro as Switzerland’s fortunes are closely tied to the economic union and a reemergence of concerns in the region could spark volatility. Meanwhile, solid support and resistance levels are converging making the case for further consolidation, making the pair an ideal scalping target.

Key Technical Levels

The 20-Day SMA at 1.1416 is coming into play as a possible support level and a potential target level. The USD/CHF has traded above the technical level since 4/19 adding to its validity. Upside potential has been limited by resistance at 1.1600, which has withstood several tests over the past few weeks. Although the pair has traded above the psychological level it has only closed above it once on 5/27 at 1.1604. The pair finds itself in a tight 100 pip range between 1.1500-1.1600 which is an ideal environment for executing high frequency strategies.

Quantitative Metrics

The debt crisis inspired rally for the USD/CHF has pushed the Bollinger band width for the pair to 729 pips which is surprisingly in the middle of the most traded pairs, but enough variance to raise concerns. Despite recent consolidation we are still seeing the pair’s ATR hold near 134 pips, but that places its daily volatility at the lower end of the pair’s listed below.

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To discuss this report or be added to the email list, contact John Rivera, Currency Analyst: jrivera@fxcm.com