Key Points:
- Bearish channel remains intact at present.
- EMA crossover could herald further losses.
- Market fears continue to drag the pair lower.
The Swiss franc has been taking back some ground from the greenback over the past number of weeks and it shows little sign of slowing as we move forward. Specifically, the rather protracted downtrend could extend all the way back to the 0.97 handle if the current technical bias holds firm. However, on the fundamental front, there is also some evidence to suggest further downside potential for the only recently resurgent pair.
First and foremost, even at a glance, a relatively tight bearish channel has been in play since late-December and this structure looks set to remain in place moving ahead. This is largely a result of the EMA bias which has finally moved into its most bullish daily configuration. Specifically, the 100 day measure has now crossed both the 12 and 20 day averages whilst it is itself tracking lower.
Aside from the damning EMA readings, the presence of a strong and historical zone of resistance around the 50.0% Fibonacci level will be limiting chances of a near-term reversal for the swissie. Indeed, the pair has largely been resisting the uptick in USD sentiment that characterised the prior sessions, resulting in some long wicks on the daily chart’s candles.
One factor that could militate somewhat against further slides is the Parabolic SAR reading. Currently signalling a bullish bias, the indicator could be interpreted as a bellwether for the embattled USD/CHF. Fortunately, in this context, it may not be indicative of an end to the recent slew of losses. Rather, it is suggestive of a near-term moderation that will likely come to an end as the pair approaches the intersection of the 50.0% Fibonacci level and the upside constraint of the channel.
After this moderation, losses should, at worst, extend to around the 0.97 handle which approximately coincides with the 78.6% Fibonacci retracement. The journey to this point will be assisted by the general malaise surrounding the market, currently strengthening haven investments such as gold, the JPY, and the CHF. What’s more, this general uncertainty is unlikely to evaporate anytime soon given the rather torrid start to Trump’s presidency.
Ultimately, keep an eye on the swissie as it could provide some rather large swings even as it continues its long-term downtrend. Specifically, look to developments from the Trump administration which is likely to inspire some day to day peaks and troughs within the confines of the channel structure. However, to avoid being caught out by any breakouts, also stay abridged of any economic data pertinent to the pair, especially as it nears the upper and lower constraints.