Can the dollar lose more pips against the franc? This forex chart sure points to it.
A couple of weeks ago we talked about how the 1.0050 handle is a big hurdle for the dollar bulls.
Well, it looks like the bears won the round! USD/CHF is now about 150 pips below the level and it looks like it has more room to fall. It has yet to hit the 100 and 200 SMA levels and, since stochastic is still in overbought territory, it could even hit its previous lows near .9500.
Dollar bears like me have a few points to work with over the next couple of days. For starters, last week’s strong NFP report didn’t really translate to a sustained dollar rally.
And then there’s the teeny tiny issue of a global trade war. Trump has not only given the go signal on adding tariffs on Canadian, Mexican, and EU steel and aluminum products, but he’s also not backing down from his threats of slapping tariffs on a bunch of Chinese products.
The EU has a couple of hoops to go through before it can react accordingly, but Mexico has already retaliated with tariffs of its own and China is making its own tariff threats. Some traders worry that an escalation of these protectionist decisions could lead to a full-blown global trade war where no one (maybe not even the dollar) wins.
Last but not the least is the improvement of economic conditions in other major economies. Italy’s political situation got a bit better over the weekend, while higher commodity prices and strong economic reports from commodity-producing countries are bringing risk appetite back and are weighing on the low-yielding dollar.
I nibbled with 0.25% of my account at .9930 last week and added another 0.25% at .9875. I placed my stop right at the 1.0050 resistance that we identified and I’m aiming for a retest of the previous support just above the .9500 zone.
Here’s the game plan:
Short 0.25% at .9930, short another 0.25% at .9875, SL at 1.0050 and PT at .9525
I’m not sure how long the bears can sustain the momentum but I’m riding the downtrend while it lasts. Of course, I’ll also be ready with my adjustments in case we see a shift that would boost the dollar back to its previous resistance levels.
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