With FX volatility rising, it’s important to take stock ofthe technical levels. Support and resistance levels for the coming week will be tested and their ability to hold will be indications of the strength and sustainability of current trends and patterns. A few specific pairs have reached the limit of a long-term range and appear to be excellent trading opportunities if a trader can position correctly.
USD/CHF – It can go lower, but facing aggressive buyers immediately below.
Although the momentum is certainly down, it appears the immediate support price level and MACD indicator could be attempting to put in a bottom. Historically, the price has seen a propensity for going lower, however the red upwards trend support should make the pair think twice before falling further. The green support line indicates a very strong buying zone going all the way back to August 2015.
In August 2015, we saw the stock market plunge almost 20% as a result of Chinese economic concerns and a shift to safe-haven assets. There is no doubt that a similar risk off atmosphere would cause the CHF to drop heavily as before and any delineated support lines in the chart would carry little significance. Therefore, a long position would have a stop loss at a comfortable level below 0.95.
Overall, this trade looks attractive because the risk/reward payoff is appealing and as the fed moves to further raise rates, holding the position for a while will be handsomely rewarded through the overnight premium.
USD/ILS – A tentative bottom looks inviting with the shekel’s rise reaching the limit of BoI’s tolerance.
As can be easily noted, the Israeli shekel has consistently bounced up from a downward trending support line after spiking in May 2015. This week we saw the pair touching the line again, briefly falling below,but with buyers coming in to save the day and prevent any further rapid shekel appreciation at 3.55 USD/ILS. This price behaviour could be put down to recent US dollar weakness combined with the impressive strength of the Israeli economy and the bounce inevitably produced by Bank of Israel intervention.
Being a small, export driven economy that cannot afford a strong currency, the BoI has been active in buying up foreign currency to weaken the strengthening shekel and on every occasion that the rate has slipped below NIS 3.60/$, the Bank of Israel has purchased hundreds of millions of dollars in foreign currency to push the exchange rate higher. This time, the bank may have sat on the sidelines as the price fell to 3.55 though it may have started intervening on Friday and this may continue for the next couple of days. Buying the Israeli shekel at this level looks profitable with a stop below the recent low at 3.54.