USD/CHF: Approaching Confluence

Markets are in a bit of a better mood this morning as virtually all of the major equity indexes around the world either closed in the green or are currently levitating healthily in that area with the lone exception being the Japanese Nikkei index that closed down over 2%. The impetus for the Nikkei fall was likely due to the Chinese GDP release that was actually better than consensus, but was still the worst result since 2009 and encouraged some JPY strength along with it. US stock markets on the other hand, have enjoyed a comfortable run to the topside despite McDonald’s missing on their earnings release this morning.

US economic data is lending a helping hand as well as Existing Home Sales beat consensus expectations of 5.11M with a 5.17M read. The 2.4% increase from last month’s number is a welcome surprise particularly after last week’s string of bad market days, and gives the US housing market a much needed boost.
Due to the positive vibe and good US data, the USD is catching a bid this morning as well, with one of the more interesting currency pairs being the USD/CHF. Throughout the month of October, this pair has been slowly descending with an occasional retracement back up to a declining trend line, and coincidentally, it has approached that level once again. In addition, it is also approaching a level of previous support/resistance which, combined with the trend line, forms a very interesting confluence.

So despite the positive feel of the market for the USD, the USD/CHF may be prevented from advancing as our old friend, the trend, defends its turf. If this were to hold, watch for 0.9475/0.95 to potentially provide the necessary resistance for this pair to retest the 0.94 region once again, which it has been doing since early last week.

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