The Swiss franc pared the decline from earlier this week and is the best performing currency against the U.S. dollar on Wednesday, and we may see the exchange rate trend lower going into the Asian trade as the greenback weakens across the board. The USD/CHF remains 80pips lower from the open after moving nearly 95% of its daily ATR, and we may see the pair retrace the advance from earlier this month following the bearish divergence in the daily RSI. However, we may see a corrective bounce over the next few hours of trading as the 30-minute RSI approaches oversold territory, and the dollar-franc may cross back above the 240-SMA at 1.0796 before we see another break to the downside. Nevertheless, the lack of momentum to cross back below the 20-Day SMA (1.0697) could lead the pair to maintain the upward trend from the January low (1.0130), and the pair looks poised to break above the 1.0900 level as the 50-Day SMA (1.0488) approaches the 200-Day SMA at 1.0499.
The British Pound is the weakest amongst the major currencies, and the exchange rate may continue to trend sideways over the next few hours of trading as price action holds within a tight range. The GBP/USD is 30pips higher on the day after moving only 48% of its average true range, and we may see price action work its way towards the 240-SMA at 1.5494 as investors raise their appetite for risk. Moreover, the pound-dollar appears to be carving out a short-term bottom around the 1.5350-1.5400 level as the pair continues to test the lower bounds of the downward trending channel, and we may see a bounce in the exchange rate as the daily RSI holds above oversold territory. However, as the Bank of England maintains a dovish policy stance and sees a risk for a protracted recovery, the pull back in interest rate expectations may lead the pair to hold the downward trending channel over the coming month, and we may see the exchange rate retrace the advance from the previous year as the Fed prepares to normalize policy this year.
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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
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