USDCHF neutral

USDCHF: Trend reversal or not yet?

17 june 2022 81
Volkov_Anton
Volkov_Anton

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1st in the segment "Currencies"
2nd in the segments "Indices", "US stocks" and "Metals"
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USDCHF pair in the last 2 trading sessions fell by more than 3%. Such a sharp movement was not seen since June last year, and then it was the beginning of the annual uptrend. The upward trend has brought the USDCHF to the parity level, from which a strong pullback has already happened twice. Will the trend reversal be finally confirmed?

 

Yesterday a strong strengthening of the franc was provided by the Swiss National Bank meeting results publication. The key rate was increased at once by 0.5%, while the market forecasts suggested the rate to stay unchanged. Despite the fact that the rate is still negative (now it is -0.25%), the signal of monetary policy tightening is very clear.

 

Since Swiss financial regulator has only 4 meetings a year, the next signal of rate change should be expected by September. During this period the Fed will hold 2 meetings, where the rate level will also seriously increase. Hence, the reversal of the USDCHF uptrend is not a certainty right now.

 

The USDCHF graph clearly shows the "double top", and the RSI indicator turned sharply down from the overbought zone. After testing the neckline at 0.955, the following options are possible:

 

1)     The uptrend break and the gradual movement of the price to the area of 0.92.

 

2)     The neckline will resist, and the price will rush upward again to the parity level of 1. But even in this case it is quite possible that the "double top" will transform into a "triple top" and then fall. After all, the dollar quotes now include an increase in the Fed key rate to almost 4%. The realization of such an increase is rather doubtful. It is more probable that the economy will go into recession and the Fed will have to save it by stopping the tightening of monetary policy.

 

 

The following trading strategy options can be offered:

 

1) Buy USDCHF at the current price. Take profit - 1. Stop loss - 0.955.

 

2) Sell USDCHF at the neckline breakdown of the "double top" pattern (0.955 level). Take profit – 0,92. Stop loss – 0,97.

 

Also traders may use Trailing stop instead of a fixed Stop loss at their convenience.

Volkov_Anton
Volkov_Anton

Listed among the best MarketCheese authors
1st in the segment "Currencies"
2nd in the segments "Indices", "US stocks" and "Metals"
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