Swiss Franc: Headwinds Are Coming From EU

The U.S. dollar rallied a bit during the day on Monday, as we continue to see greenback strength. Beyond that, the greatest headwinds for the Swiss franc are the European Central Bank’s announcement that they will remain on the sidelines and their concern about EU growth. While the Swiss have their own central bank, 85% of all Swiss exports head into the European Union. Think of it this way: if your biggest customer is suddenly struggling, then your business isn’t going to be very good.

Ultimately, if we break above the 1.0150 level, then we break the top of a wedge type pattern that goes back for some time. What would also be very interesting about a break out to the upside is that we have a pergence going on in the MACD indicator, as shown on the chart. At the first signs of exhaustion are more than willing to start selling, but I recognize that it won’t necessarily be the easiest trade to take.

To the downside, if we go down from here it’s very likely that we start reaching towards the 1.0010 region before running into major support again. The 50-day EMA is just below there, and of course, we have the 200-day EMA underneath that. If we were to break through both of those major moving averages, then we will probably continue to reach down towards the uptrend line below there. That’s not my base case is right now, rather I think we will roll over from here as we have gotten a bit overextended in the short term. Remember, this pair doesn’t typically move that quickly, so patients will be needed.

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