Potential signal:
- If this pair drops below the 0.5950 level, I am short, aiming for the recent lows, with a stop loss at the 0.5990 level.
The Canadian dollar initially did try to rally against the Swiss franc during trading on Wednesday but has given back quite a bit of the gains. It is because of this that the pair has grabbed my attention, mainly due to the fact that we are near an area that I think would be very important. At this point, the 0.5950 level seems to be support.
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The fact that we continue to see long wicks to the upside sets up a couple of potential trades. Trading sometimes is about catching traders offsides on the wrong side of the trade, and other times just simply about following. The economic situation in Canada is struggling, and of course, oil continues to get pounded. So that explains why the Canadian dollar itself is shrinking.
If we were to break down below the 0.59 level, I think it's likely that we will go back towards the low. If we turn around and break above the 0.6050 level, then you may catch enough traders offside to see the Canadian dollar rise to 0.62 Swiss francs. All things being equal, this is a barometer for risk appetite, and risk appetite seems pretty poor, as you can see.
Remember the Safety Aspect of the Swiss Franc
After all, the Swiss franc is considered to be a safety currency and it's probably worth noting that the Swiss franc has done fairly well against most currencies. But Canada is a special case in the sense that the Canadian economy is pretty poor. And in fact, Canada is the worst performing G10 country out there. That has been the case for a while, and I think it continues to be going forward. Until oil perks up and starts to rally, I think this market still has more of a downside vibe to it. But like I said, if we can break above 0.6050, you may catch some traders offside.
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