Dollar (USD), Swiss Franc (CHF) Talking Points:
- USD/CHF remains rangebound after bulls fail to reclaim 0.9300
- Russia-Ukraine tensions support safe-haven currencies
- US Dollar resilience may pose as an additional catalyst for price action
USD/CHF has recently lost steam as rising geopolitical risks overshadow potential rate hikes. With the Federal Reserve now committed to rise rates in an effort to counter the effects of elevated inflation, the SNB (Swiss National Bank) continues to maintain a dovish stance, limiting CHF strength.
However, amid the current geopolitical backdrop, rising tensions between Russia and the Ukraine and the potential unwinding of the carry trade (interest rate differentials) have buoyed demand for the Swissie, allowing USD/CHF prices to edge slightly lower.
USD/CHF Technical Analysis
After a remarkable change-of-pace in USD/CHF trend throughout January, a shift in risk sentiment hindered the ability for bulls to drive prices higher, forcing the pair back below the 0.930 handle, currently providing resistance for the imminent move.
As price action now searches for clarity, key Fibonacci levels of both the short (November 2021 move) and medium-term (2021) move continue to provide both support and resistance for further progression, prices remain above the 50-period MA (moving average) with the MACD (moving average convergence/divergence) resting above the zero-line.
USD/CHF Daily Chart
Chart prepared by Tammy Da Costa using Tradingview
If the retracement turns out to be a mere correction in prices, bulls may have the opportunity to regain dominance over the trend, resulting in a probable retest of the next big level of 0.930. If bullish continuation prevails, the next level of resistance holds at the November high 0.937 which leaves the door open for the 2021 high at 0.947.
USD/CHF: Retail trader data shows 67.48% of traders are net-long with the ratio of traders long to short at 2.07 to 1. The number of traders net-long is 8.08% higher than yesterday and 4.43% lower from last week, while the number of traders net-short is 10.65% higher than yesterday and 8.09% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CHF prices may continue to fall.
Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CHF price trend may soon reverse higher despite the fact traders remain net-long.
— Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707