Towards the end of last week USDCHF broke above the noted 0.9070 level, which saw the convergence of falling wedge resistance & the 61.8% retracement of October’s decline, and affirmed daily RSI as it had already broken above corresponding wedge resistance. Technically, this is a longer-term bullish development as this pattern projects a measured move objective of 0.9630, however there are many near-term hurdles which may prove difficult to surmount.
USDCHF sees a confluence of technical resistance between 0.9130-50:
• June & August 2013 lows
• 55-day sma
• 13-week sma (not shown)
• Daily Ichimoku Cloud bottom
Furthermore, daily RSI in nearing the key 60/65 level, which is typically where it may find resistance if it’s in a prolonged downtrend, however if this is broken it could signify a renewed uptrend in price. Should this occur, USDCHF’s next potential levels to watch are 0.9180 (October 2013 High), followed by 0.9240/55 which sees the convergence of the 38.2% retracement, daily 144/169 EMA’s & 100-day sma.
Fundamentally, recent data out of Switzerland has been troubling with Oct. PMI Manufacturing slipping to 54.2 from 55.3 (exp. 55.2) and Oct. CPI coming in at -0.1% vs. consensus +0.1% MoM, which is down from +0.3% in September. As a result, this makes the SNB’s job that much more difficult since deflation remains a critical issue. On the flip side, US data has outperformed with October ISM Manufacturing rising to 56.4 from 56.2 (exp. 55.0) and Oct. ISM Services increasing to 55.4 from 54.4 in September. Taken together, this bifurcation of economic data between the two countries would support a higher USDCHF.
Chart Source: Forex Charts by eSignal
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