USD/CHF – Headed for 1.05

USD/CHF – Headed for 1.05

USD/CHF – Headed for 1.05

The U.S. dollar climbed to its strongest level in 5 years versus the Swiss Franc. The greenback has been performing extremely well ahead of next month’s monetary policy meeting and with 3 weeks to go before the Fed meeting we expect the dollar to extend its gains. The Swiss Franc on the other hand is benefitting from the SNB’s continued attempts to talk down the currency. With the ECB expected to increase stimulus next week, the SNB is worried that declines in EUR will drive the CHF lower through EUR/CHF flows. The Eurozone is Switzerland’s number one trading partner and a stronger Franc would be detrimental to trade activity. So with actions from the Fed and SNB expected to drive USD/CHF higher, we expect the currency pair to test 1.05.

Technically, 1.05 is also the next major resistance level for USD/CHF. Taking a look at the monthly chart the currency pair has broken above parity (1.0), which is not only a psychological significant level but is also not far from where the 100-month SMA and 61.8% Fibonacci retracement of the 2010 to 2011 decline converge. This level is now support. There is some short term resistance at Friday’s high of 1.0260 but once that level is cleared, 1.05 should be the next target for the pair.

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