USD/CHF Hits Resistance – Remains Above Ichimoku

 

After the Fed's surprise projection on more rate hikes in 2017, USD/CHF hit resistance and then retraced. With the US electoral college vote coming up on Monday, let's take an IDDA approach to strategy development for those who are not members of our Invest Diva Facebook community.

Technical Analysis - Daily Chart 

USD/CHF broke out of its medium-term range between 0.9950 and 0.9550 after the US elections, and managed to reach an 11-month high of 1.0195  in December. After the FOMC rate decision and statement, the pair broke above this level, reaching a one-year high and strong resistance of 1.03, before pulling back down. The prevailing daily Ichimoku cloud is moving up sharply.

However this pair has a tendency to range. 

USD/CHF Hits Resistance - Daily Chart Technical Analysis

With that, the question is, what is next for this pair? Will the 1.03 resistance hold? With no other significant signals on the Daily chart, let's take a look at the other points of the IDDA.

Monthly Time Frame 

On the monthly chart, the pair is has been ranging in an upward channel after massive drops in 2011 which brought the pair's median price range significantly lower. The pair confirmed above the Daily Ichimoku cloud in August 2015. The upper band of the channel meets the 76%

retracement level as resistance. 

USD/CHF Hits Resistance - Monthly Chart Technical Analysis

Fundamentals - USD/CHF Hits Resistance

Since November the US has been on fire with the "Trump effect" and the Federal Reserve rate hike. The REAL surprise was the FOMC statement, in which the Fed forecast three rate hikes next year, and that it could need to do more. They also upgraded their outlook on the US economy and basically said Uncle Sam is going to have a good time in the coming year. However, there are a couple points you want to keep in mind before getting excited:  

• Last year, the Fed also said they are looking to increase interest rates a bunch of times in 2016. And yet they ended up doing it only once.
• Trump's presidency could be under question under Russia's hacking investigation and the conflict of interest of his businesses with Presidency

So what's an Invest Diva to do?  

Swiss Side 

Unlike the US, Switzerland has remained neutral in economic data, just like their political position. Last Thursday the SNB kept interest rates unchanged at -0.75%, while their unemployment rate remained unchanged at 3.3% the week before. Yawn. Their consumer price index however ticked lower in December, printing -0.3% vs. -0.2% expected. Meanwhile their Retail Sales for October improved from -2.1% to -0.5%. So pretty neutral indeed.

Market Sentiment 

On Friday, 50% of traders were bullish on USD/CHF as it hit resistance. The day before, the ratio was -1.00; 50% of open positions were long. Long positions are 2883.3% higher than yesterday and 16.1% below levels seen last week. Short positions are 2837.5% higher than yesterday and 8.2% below levels seen last week. Open interest is 2860.4% higher than yesterday and 8.4% below its monthly average. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives signal that the USD/CHF may continue lower. The trading crowd has flipped from net-short to net-long from yesterday but unchanged since last week. The combination of current sentiment and recent changes gives a further mixed trading bias. Look out for more updates for USD/CHF market sentiment on our Facebook page.  

Trading Strategy 

Putting the technical, fundamental and sentimental points of the IDDA approach together, we could consider going for a medium to short-term trade. Please visit out Premium Facebook Group for detailed trading strategies and risk management ideas. 

Here are Invest Diva's calculations for important approximate levels to keep an eye on: