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USDCHF at Parity but for How Long?

USDCHF at Parity but for How Long?

Zorrays Junaid, Contributor
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Since August 2022 at 0.937, USDCHF has been in a bullish sequence as this was supported by the recent dollar strength. This may stall as dollar seems like it is due for a breather, but this is only temporarily. In my opinion, this stall would be a short-term correction prior to a continuation to the upside.

Taking into SNB’s recent commentary it seems like they are targeting a real stability to fight inflation. Switzerland’s inflation is around 4% below its trading partners which would mean the nominal exchange would need to be at least 4% stronger to support a stable exchange rate. This would support CHF’s strength in the near-term future for at least a few weeks.

Currently, USDCHF is at parity, but this may reverse as it seems like the pair is due for a medium-term correction but the bigger picture is telling us that a continuation to support dollar strength is still in play for at least up to Q2 2023.

Lets do a top down on USDCHF

USDCHF Monthly Chart

Creating by Zorrays Junaid on Trading View

Although since 2011 low USDCHF has been playing out a bullish sequence, but majority of this price action has been coiling into a triangle which in fact has been officially triggered yesterday as price breached through 1.00646.

Before we expect USDCHF to reach into the moon, we must be aware that a correction or another push down prior to a continuation is still on the cards.

USDCHF 4 Hour Chart

Creating by Zorrays Junaid on Trading View

This chart is interesting. I can see a 5-wave impulse as a Leading Diagonal, but I can see it is exhausting and giving clues that a correction to the downside is due.

Firstly, the price action is very choppy and overlapping. Secondly, there is strong RSI divergence which shows the bulls are running out of steam.

I have also placed the 200 Day Moving Average which is below the current price but once this correction plays out, the moving average can be used as a dynamic support area where we can expect price to stall around prior to a continuation.

Overall, the near-term picture is telling me that CHF is keen on gaining strength and the Dollar is due for a stall. On the other hand the bigger picture is still supports a continuation once that correction is done, as long as price remains above 0.937.

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