USD/CHF: Time for a breakout?

Steven Mylonas Bottomcatcher.com

The USD/CHF currency pair has been range-bound since early 2015 (A) and now trading below its 200 period moving average across all time frames looks to be within spitting distance of retesting strong channel support as it did back in early March of this year (9182.3).

So What?

Well, what’s interesting this week is the fundamental data released by the Commitment of Traders report (COT) which covers positions held by three groups of traders (Commercials, Non-Commercials and Small speculators) from Tuesday’s settlement through to Friday. Non Commercials (large speculators, funds etc) reduced their bearish net positions in the Dollar (USD) totalling a net position of -4,975 contracts, a change of 339 contracts from the previous week which had a total of -5,314 net contracts. So that was a slight change, but a change nonetheless.

On the Swiss Franc (CHF) speculators last week held a net position of 4,338 contracts up from the previous week by 2,890 contracts. But what caught our attention is what exposure the Commercial Hedgers (commonly known as the Smart Money hedgers) have. Last week they established a multi-year short position on the Swiss Franc totalling -8910.00 contracts, which is considered extreme, last seen in April 2016 and before that, May 2015. And on the US Dollar their net long 4998.00 contracts which is just a shade below the 5,199 contacts they held back in November 2017, In other words, they’re very bullish on the Dollar and very very bearish on the Swiss Franc.

We like to focus on the Smart Money as they tend to drive the markets ‘WHEN’ they reach an extreme. Our studies suggest on average when the Smart Money hedgers reach an extreme a turning point could occur a few weeks down the line, which ties in nicely with the chart. Providing the Smart Money holds this kind of exposure on the Dollar and in particular, the Swiss Franc, coupled with the strong support that awaits at the bottom of the range-bound channel (A) we could expect to see a change in direction to the upside. Definitely one for the watchlist.

Author

Steven Mylonas

Bottomcatcher.com

With more than 20 years of experience, Steven has a broad knowledge of market strategies and the markets in general, with a strong focus and understanding of data reading.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.