Key Points:
- Despite recent bullishness, the decline should resume shortly.
- Losses could extend to around the 0.9817 mark.
- Fundamentals also remain in favour of further losses.
The Swissy’s recent decline has been on pause over the past few sessions which cast some doubt on the likelihood of seeing a retracement all the way to the downside of its consolidation phase. Fortunately for the bears out there, the bias remains in your favour given both technicals and fundamentals are aligned and suggestive of further losses.
Starting with the technicals, there are a number of instruments indicating that, despite the recent uptick in buying pressure, losses are likely to resume in fairly short order. For one, the EMA bias is highly bearish as it is, in fact, now in the process of completing a crossover which could hint that a serious downtrend is getting underway. Furthermore, the MACD and Parabolic SAR readings remain in favour of additional losses which would support the argument for a retracement all the way back to the downside of the overarching wedge structure.
Due to the robust bearish technical bias, it may seem odd that we have had a number of rather bullish sessions from the USDCHF. Indeed, this could be indicative that something else is at play and working in opposition to the broader forecast. Luckily, one simpler explanation is available which doesn’t entirely upset the apple cart so to speak. Specifically, the recent surge in buying is probably reflective of the stochastics being relievedafter being forced into oversold territory by the plunge seen on Tuesday.
Moving onto the fundamental bias, this remains bearish for largely the same reasons as discussed previously. In particular, the deterioration of both the Syrian and North Korean situations, alongside the ongoing uncertainty over Brexit, continue to drag the pair lower due to the Franc’s safe haven status. Although, more recently, the snap election announcement from the UK government and the slight, yet not insignificant, gains made by Le Pen in the French Election polls are adding to global anxiety. As a result, it’s little wonder that the Swissy has a rather grim outlook and is predisposed to the downside over the coming weeks.
Ultimately, the combination of the above mentioned technicals and fundamentals should be more than enough to keep the pressure on the USDCHF and see the forecasted decline take hold. This being said, monitor the 38.2% Fibonacci level around parity as, if the pair crosses back above this price, it could move to retest the upside.
