Key Points:
- Price action fails to breach trend line and turns negative.
- Key support level at 0.9585 nearing.
- Watch for a breakdown towards the 0.9550 mark in the coming week.
The USDCHF has been under some significant selling pressure of late as the pair continues to decline under the auspices of a bearish trend line. However, there has been some short term resurgence for the pair which saw a concerted move, which ultimately failed, back towards the falling trend line. Subsequently, the ill-fated, short term rally has set the wheels of a breakdown in motion that could yield some significant short side moves in the week ahead.
Fundamentally, there has been a significant swing around the greenback sentiment due to a range of confusing and mixed economic data emanating from the U.S. In particular, retail sales, consumer spending, and a lack of wage inflation appears to be clouding the current economic outlook for the U.S. and this is adding to slipping greenback sentiment. In addition, this is largely overshadowing some of the recent relatively poor data from Switzerland, including a slip in the monthly CPI figures.
In particular, a quick review of the major technical factors provides some illuminating hints as to what is coming for the embattled pair. Presently, the RSI Oscillator is demonstrating a definite downtrend but is yet to reach neutral territory which suggests that there is still room to move on the downside. Also, price action is currently well below the 100 hour moving average and there looks to be little prospect of an upside move towards that level any time soon.
Subsequently, the view is that the pair’s recent decline from the 0.9688 mark towards support around the 0.9600 handle suggests that the longer term decline is not yet completed. The most likely scenario is then likely to be a challenge to support at 0.9585 before a sharp move towards our initial target of 0.9552, representing the recent low, and ultimately towards the 0.9500 handle.
Ultimately, the next week will likely be relatively critical for the pair with an impending breakdown and challenge to support at 0.9585. Subsequently, be on guard for a breach of this level because it will cause a fairly rapid Dollar depreciation.
