USDCHF – Probable Price Paths
US equity markets were closed last Friday in observance of Good Friday. However, US stock futures were lower on early Monday (13-Apr) Asian trade after OPEC and other oil-producing countries reached a deal on a massive production cut while investors digested the outlook on the coronavirus. US bond markets were also closed last Friday. On Thursday, yields on US Treasuries were mostly lower as market participants weighed another jump in US jobless claims as well as new Federal Reserve measures to backstop the reeling US economy amid the COVID-19 crisis.
Trading was largely subdued within the FX space due to the holiday-thinned market, but optimism in financial markets saw the haven-linked USD and JPY under pressure. EURUSD closed at little changed at 1.0934 (+0.07%), whilst GBPUSD ended +0.01% at 1.2468 as markets breathed a sigh of relief after British PM Boris Johnson left intensive care following his hospitalization for COVID19 symptoms. Commodity currencies drew support from hopeful signs the COVID-19 pandemic may be peaking and that major oil producers may agree to cut output to stem a plunge in oil prices.
On the CFTC front, leveraged accounts reduced their implied USD longs, especially against the EUR and AUD, while non-commercial accounts deepened their implied USD shorts marginally. Overall, even though the short term players moved against the USD in the latest week, note that the absolute change in positions has been very small over the past four weeks, suggesting that the community itself is also tentative and uncertain over the broad USD outlook.
From a technical and trading perspective, the USDCHF is testing the 100% Fibonacci extension and the Fibonacci retracement at the .9630/50 area. As this area supports there is the potential for a reversal to develop, the bullish bias would be encouraged on move back through the .9700 handle this would open a move to retest and marginally exceed the prior cycle highs to ultimately test the equidistant swing objective at .9920/30. The initial catalyst for this move would be a H4 close above .9650 flipping the H4 chart bullish as per the near term volume weighted average price, with further confirmation seen on a daily close above .9700. A sustained breach of .9630 would negate the bullish thesis and reset sights on the broader downside objective sighted at .9405
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