USD/CHF Technical Analysis: Breaking the Range with Reckless Abandon

2016-11-23 15:26:00

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Talking Points:

USD/CHF Technical Strategy: Rampant USD-strength continues, 8-month range broken.
Swissy is still below resistance values from earlier in the year, which could keep the door open for reversal strategies for traders looking to take on short-USD exposure.
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In our last article, we asked if the range in USD/CHF was still alive. But the rampant run in the U.S. Dollar is continuing to smash through resistance levels as the ‘reflation’ trade gets further priced-in to markets; and this has led to major support or resistance breaks in key areas such as EUR/USD, USD/JPY and Gold. But, for much of this run one of the apparent laggards in showing that USD-strength has been USD/CHF, as the pair had previously remained below prior resistance levels, giving rise to the idea that this could be an attractive venue to voice short-USD exposure.

But as we had written last week, with fresh highs showing, traders would likely want to put the range-trade on the back-burner until more information unveiled itself. And it has, but in terms of the prospect of range continuation that additional information hasn’t been very positive, as USD/CHF has broken out to fresh nine-month highs, taking out the March swing high at 1.0092 along with it.

Moving forward, traders would likely want to look elsewhere to voice long-USD themes, as USD/CHF has continued to lag behind markets such as EUR/USD, USD/JPY or Gold in pricing-in this newfound bout of USD-strength. This could also keep the pair as potentially attractive for traders looking to manage off long-USD exposure, or for those looking at reversal plays in the Greenback. There are three potential resistance levels that can be utilized for such an approach, as we look at below. Of particular note, the zone around 1.0300 is interesting as this is the 61.8% retracement of the 8-year move in the pair (taking the 2008 high to the 2011 low), as well as being the six-year high in USD/CHF.