USD/CHF Tests Critical Support Following Soft US Data

Technical Sentiment: Bullish

Key Takeaways

• USD/CHF re-tested critical support confluence on disappointing Services PMI (3) and Pending Home Sales (0.3%);
• Bounce is expected towards 0.9600 in order to preserve bullish bias;
• Core Durable Goods Orders m/m and CB Consumer Confidence are due to be released on Tuesday, both with bullish expectations;

The U.S. Dollar traded lower against most counterparts on Monday due to easing growth in the service sector and a smaller than expected rise in Pending Home Sales. Sellers pushed the pair down to a critical support however rallies are expected to resume on Tuesday.

 

Technical Analysis

USD/CHF spot is trading at 0.9485 during the second half of the 27^th/10 U.S. session. Price dipped as low as 0.9475 earlier, testing a confluence formed around 50 and 200 Simple Moving Averages on 4H timeframe coupled with a strong pivot zone formed throughout October.

From a swing configuration perspective, a Higher Low is expected to form around current levels due to 23^rd October Higher High. For now USD/CHF remains in bullish territory and a recovery is expected towards 0.9590 – 0.9600 this week, as long as pending U.S. data will be able to boost the greenback. If we’re counting on a complete uptrend return, targets of 0.9685 and above are also very likely.

A break below 0.9465/75 followed by price stabilizing in bearish territory could pose problems for USD/CHF’s recent bullish intentions. If this is the case, 0.9400 (support, downtrend-channel resistance and 50-Day Moving Average) could be re-tested, opening the door for sellers to potentially attack lower levels in November.

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Prepared by Alex, Currency Strategist at Capital Trust Markets