The USDCHF bounced from the 0.90 level just when the Dollar Index reversed. The recent move lower in the last couple of days comes in the context of a lower USD across the board.
But that is likely to reverse soon. By falling to the current 0.92 level, the USDCHF meets support at a confluence area. On the one hand, the previous horizontal resistance turned into support. On the other hand, the market also meets dynamic support at the same level given by the rising channel’s median line.
Today the ECB hosted the ECB Watchers conference. As usual, the ECB President, Christine Lagarde, gave the opening remarks and she was not shy at all.
Delivering a crystal clear dovish message, Lagarde pointed to what the ECB will do both in the short, but also in the medium and long term.
In the short term, she signaled more QE as soon as December. In the medium term, Lagarde pointed to an explicit focus on core inflation. Finally, on the long term, she even hinted to symmetric inflation target with some kind of soft Average Inflation Targeting (AIT).
Why does it matter for the USDCHF? The answer comes from the tight, albeit negative correlation between the two markets. If the EURUSD falls, the chances are the USDCHF rises.
The technical picture shows the USDCHF breaking tough resistance and then falling back to it only to meet support. If we connect the absolute low with the first higher low and project the resulting trendline above the first swing higher, the resulting channel reveals the price sitting at dynamic support too – a confluence area difficult to break.
To trade it, bears would want to enter at market and target the upper edge of the channel with a stop loss at 0.9180. Moreover, if the market breaks the upper edge of the rising channel, it may easily continue until the previous consolidation area around the 0.94 level.
