Potential signal:
- I am a buyer of the USD/CHF pair right here.
- I have a stop loss of 0.7850 and a target of 0.8880 above
The US dollar slid sharply against the Swiss franc amid renewed market fear, pushing the pair toward support near 0.79. Despite broader downside pressure, consolidation and potential SNB sensitivity to franc strength leave room for a cautious bounce.
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The US dollar initially tried to recover against the Swiss franc but has collapsed since then, as there are a lot of signs of fear out there. I'm not exactly sure what's causing the daily panic, but today it looks like the Swiss franc is being run toward.
That's fine. We happen to find ourselves near the 0.79 level, an area that I think should continue to offer support. We'll just have to wait and see. I don't necessarily want to jump in and start buying hand over fist here, but we are in the midst of what I think is a reasonable consolidation pattern. And I do think there's an opportunity here because, quite frankly, if we break down below 0.7850, that's when you know the trade didn't work.
Pretty Scary Fall
Pretty scary, precipitous fall, but most of the time these types of moves lack a little bit of momentum. We'll see. Short-term traders will probably continue to look at this as a potential buying opportunity. I, full disclosure, have just bought some dollars against the Swiss franc, but we'll see how that works out. I also recognize that there is a point where you just have to get out. Yes, it is in a massive downtrend. However, this is a little bit different animal in the sense that the Swiss National Bank will not hesitate to get involved if the Swiss franc strengthens too much.
Generally, they use a measurement against the euro to make that decision. But at this point in time, I think if things get out of control in any pair, they could get involved. Also, the US dollar isn’t falling apart against most currencies. It is a little softer during the day on Thursday, but it's not the end of the world. Let's not get hung up on a few hours' worth of action. The Swiss franc has been stronger than the dollar, and it may continue to be we just don't know.
But I'm not a big fan of shorting the dollar in general. We are seeing a little bit of an attempt to bounce already, but this is not a quick-moving pair. We'll just have to see how it all plays out.
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