I was looking for an opportunity for the next month when I stumbled upon CAD/CHF’s big resistance level.
Here’s what I’m looking at:
2021 has been a GREAT year for the Loonie as traders priced in their global economic recovery optimism. Bulls were particularly happy about increased vaccinations, a pickup in global oil demand, and the U.S. economic recovery.
CAD/CHF jumped by 650 pips before hitting a ceiling at .7500 at the start of April.
The pair had fallen by 270 pips since then, but the Bank of Canada (BOC) tapering its asset purchases – the first among its peers – and hinting at an interest rate hike in 2022 brought the bulls to the Loonie’s yard and erased half of April’s losses.
I’m looking at CAD/CHF today because I’m not expecting a big catalyst that could turn traders away from the Loonie any time soon. It also doesn’t hurt that a long CAD/CHF trade is a good carry trade option right now.
If the pair manages to break above .9400, then it could make its way to the .7500 March highs or even the .7600 major area of interest. MarketMilk tells me that CAD/CHF has an average volatility of about 280 pips in the last ten May months so a visit to .7600 can happen.
Of course, I’ll also be prepared for some risk aversion in the next few weeks. I also won’t ignore the descending channel in the lower time frames or the overbought Stochastic signal on the daily.
If traders do sell in May, or if CAD/CHF’s channel resistance turns out to be too solid for the bulls, then I’ll look into shorting CAD/CHF until it hits April’s lows.
What do you think? Can the Loonie extend its gains against the franc in the next few days? Or will we see more weakness from the comdoll in May?
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