USD/CHF consolidates in a narrowing triangle ahead of important events

  • The USD/CHF is trading within a narrowing channel as seen on the hourly chart.
  • The Swiss franc has returned to its role as a safe haven currency but not a major one.
  • Top-tier US releases later in the week are set to determine the next moves.

The USD/CHF is trading around 0.9385, balanced on the day. The pair traded in a narrow range, confined between 0.9363 and 0.9406. Steady trading is also seen in other currency pairs. 

Despite the steady trading, the chart below shows a narrowing triangle. The pair has marked lower highs and higher lows in its narrowing range. The consolidation in this pattern implies a significant breakout when the pair moves out of the wedge. 

Resistance awaits at 09410, which marks the top of the downtrend resistance line. Further resistance is at the swing high of 0.9470. 

Support awaits at the bottom of the uptrend support, at 09348. Further support is at 0.9308 seen last week. 

USD/CHF returns to its safe haven role

Markets are calmer and are rising gradually after a week of sell-offs. The positive close on Friday extended into a quiet trading day on Monday. The economic calendar is quite sparse on Monday, but markets are already eying the US inflation report on Wednesday.

A rise in US inflation is likely to push stocks lower on expectations for the Fed to raise rates at a quicker pace. The US dollar is set to rise in this scenario against most currencies, with the exception of the yen and to a lesser extent, the Swiss franc. Lower inflation may send stocks higher and the franc lower. See the full preview here

The franc was a top-tier safe-haven currency in 2011 until the Swiss National Bank intervened in September of that year to peg the currency to the euro, a peg that continued through January 2015. Recent market jitters have triggered the same behavior from the currency.

 

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