For the past few months, USD/CHF has traded between the .8700 and .9000 range. The problem for the US dollar is that the new neutral belief is that interest rates will remain low for the next year or two. As Fed deals with the liquidity trap it has created, economic growth will likely remain positive but very slow. With stimulus slowly being taken back, volatility might remain quiet throughout the summer and the end result for U.S. yields is to remain range bound and unlikely just yet to break out above the key 3.0% threshold. The net effect in the currency market might be that the dollar might not have significant gains to the other safe-haven currencies.
The bearish channel displayed on the daily chart on USD/CHF has finally been breached and price is tentatively respecting the 200-day SMA. Since the record low of .8698 made early in March, price made a double-bottom formation earlier this month. With a tentative pullback occurring, price may attempt a decline towards the 100-day SMA. The year-end outlook for this pair might be .9400. Major support will come from the .9700 handle.
The trade: Buy USD/CHF at .8900 with a stop loss at .8850 and a take profit at .9050. The Risk/Reward Ratio is just under 1:3.
Edward J. Moya
WorldWideMarkets Online Trading