Tensions between the U.S. and Iran seem to have de-escalated over the past few hours, but could this just be the calm before the storm?
Currency Snapshot:
Fresh Market Headlines & Economic Data:
- Australian weather agencies see no sign of rain to quell bushfires soon
- U.S. and Iran hint at desire to de-escalate tensions
- Trump says no need for U.S. to hit back after Iran’s attack on bases in Iraq
- Trump: U.S. “will immediately impose additional punishing economic sanctions on the Iranian regime”
- U.S. Democrats schedule vote on legislation to prevent Trump from declaring war
- New Zealand ANZ commodity prices slip 2.8% after earlier 4.3% gain
- U.K. BRC retail sales monitor rebounded by 1.7% vs. projected 0.5% dip
- Australian trade balance expanded from 4.08B to 5.80B AUD vs. 4.10B AUD forecast
- Chinese CPI steady at 4.5% y/y in December vs. projected 4.7% gain
Upcoming Potential Catalysts on the Forex Calendar:
- German industrial production at 8:00 am GMT
- German trade balance at 8:00 am GMT
- Swiss retail sales at 8:30 am GMT
- SNB foreign currency reserves at 9:00 am GMT
- BOE Governor Carney’s speech at 10:00 am GMT
- Euro zone unemployment rate at 11:00 am GMT
What to Watch: USD/CHF
Easing tensions between the U.S. and Iran could keep propping up demand for the scrilla while at the same time weighing on the gold-related franc.
In addition, the Swiss currency could enjoy a bit more volatility in the upcoming session since retail sales data and the SNB foreign currency reserves report will be released.
This pair has formed a complex double bottom formation to signal that its short-term selloff might be over. Price is already testing the neckline, and a break higher could set off a climb that’s the same height as the chart pattern.
Looking at the trend analysis on MarketMilk reveals a bullish one for USD/CHF:
A long position on a break above the neckline resistance around .9740 with a stop of 40-50 pips and a target of the same height as the double bottom at around 80 pips could work as a breakout setup.
Resurfacing tensions, on the other hand, could revive demand for the franc while traders dump the U.S. currency. In that case, a short position on a bounce off the neckline and a target at the .9660 lows could be the way to go.
