Swiss Franc Strengthens on U.S. Dollar Weakness, British Pound Falters

The Swiss franc retraced the previous day’s decline against the greenback and remains the best performing currency on Wednesday after moving nearly 80% of its ATR, and the exchange rate may continue to hold a narrow range throughout the North American trade as it approaches parity. The USD/CHF fell back from the high (1.0169) and slipped back below the 20-Day SMA (1.0155) to reach a low of 1.0085 on the back of U.S. dollar weakness, and the pair may continue to hold the downtrend from earlier this year as the reserve currency remains the most popular funding-currency, next to the Japanese yen. However, as the 30-minute RSI bounce back from oversold territory, we could see the dollar-franc attempt to cross above the 100-SMA (1.0122) and 200-SMA (1.0127) ahead of the Asian session as investors scale back their appetite for risk. Nevertheless, the USD/CHF looks to be forming a double-bottom after slipping to a fresh yearly low of 1.0032 during the previous month, and we may see a reversal follow over the coming weeks as the pair continues to test for near-term support.

The British Pound tipped lower against the greenback following the Bank of England meeting minutes, and is the worst performing currency amongst the majors as the exchange rate remains 50pips lower from the open. The GBP/USD as moved approximately 60% of its daily average true range and continues to hold the range from the previous week, and the pair may hold steady going into the Asian trade as investors weigh the outlook for future policy. At the same time, the U.K. Public Finances report due out at 9:30 GMT tomorrow is likely to stoke increased volatility in the British Pound, and we may see the pound-dollar breakout of its range from the previous week as market participants weigh the prospects for a sustainable recovery within the region. Nevertheless, as the rally remains well-supported by the 20-Day moving average at 1.6567, we could see the GBP/USD continue to pare the August decline however, as the RSI continues to approach overbought territory, we are likely to see a corrective retracement before the pair pushes higher.

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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com