Risk off may continue, but It may be Time to Buy USD/CHF

The Swiss Franc is not necessarily considered to be “Flight to Safety”

Historically, the Swiss Franc has been considered to be a “Flight to Safety”.  In other words, as risky assets begin to sell off, such as stocks, one may consider selling the USD and buying CHF.  Therefore, selling USD/CHF makes sense when there is a risk off move.

However, over the last few years the Swiss National Bank has given the market reason to reconsider this thinking.  (To be more specific, the unreliability of the SNB began on January 15, 2015 when the SNB depegged the Euro from the Swiss Franc and EUR/CHF began to freefall).  Since then, the SNB has been intervening in the currency markets to prop up the Swiss Franc pairs. 

Therefore, when we see risk off moves these days, the Swiss Franc is not necessarily considered to be the “Flight to Safety” that it once was.

USD/CHF has been in an upward channel since March of 2018.  On Monday, the pair broke lower through the bottom Trendline at .9735, and quickly bounced back into the channel the next day, creating a false breakdown.  In addition, the RSI is now diverging from price, and the pair put in a lower level on price, however a higher level on the RSI. 

Source: Tradingview, City Index

A move above resistance at .9780, which is the 38.2% retracement level from the .9977 high on August 1st, to the low of .9658 on August 6th, may be a signal to buy USD/CHF. 

Source: Tradingview, City Index

First resistance is the 50% retracement level from that same period and horizontal resistance at roughly .9815.  Above that, the pair could then target the downward sloping trendline near .9925.  Support is down at Tuesday’s lows, .9658.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.