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The Trend of the Day - USD/CHF

The Trend of the Day - USD/CHF

2009-11-06 17:38:00
Gregory McLeod, Currency Analyst
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Short term Swissy Rally Could Lead to Bigger Drop

The greatly awaited NFP unemployment report has come and gone revealing that the U.S. has shed 190,000 jobs from the economy.
Initially, USD/CHF rallied from the 1.0125 lows to a high of 1.0201 at the time of this writing. The worse than expected number has signaled to traders that the U.S. economy is far from a recovery as the unemployment number tops 10% for the first time.

All of this seems to tell traders that they should move from risky assets and move into the U.S. dollar to find the safety of U.S. Treasuries. The interest earned is extremely low, however the principle is guaranteed.
It would also seem that the USD/CHF would benefit from such risk averse news. This had been the story but the markets are funny. When you've think you have figured out a neat correlation or reason for the currencies to move a certain way, the markets do just the opposite.

Head Fake or or Trend Reversal?

The USD/CHF should get a short term pop up to the 1.0259 area because price could not break below the low at 1.0118. In fact, it looks like a triple bottom as sellers are taking profits form the run down from the 1.0346 November 3rd high. Look for USD/CHF to find signficant resistance
in the 1.0205 to 1.0300 zone. This is where Fibonacci resistance levels are located; 1.0205-38% , 1.0232-50%, 1.0259-61.8%.

According to the FXCM Speculative Sentiment Index, retail clients are long USD/CHF by a margin of 3:1. This is an extremely bearish reading as SSI is a contrarian indicator. This means when the crowd gets long, it is time to short. When the crowd is short, it is time to buy.

I am looking at entering short at 1.0250 with a 100 pip stop at the 1.0350 level. I would set a Limit at the 1.0032 level which is the 100% retracement of the whole run-up from October 23 to November 3rd.

usdchf 11.06.2009

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