Will the upcoming U.S. employment update keep the bull party going in USD/CHF? Is there an opportunity to get in the uptrend at better prices?
USD/CHF Setup Ahead of NFP?
On the one hour chart of USD/CHF above, we can see the market has been on a tear higher since the end of February after breaking out of consolidation between 0.9030 and 0.9100. It’s likely the recent rally in bond yields are the culprit for the move as they drove traders away from riskier assets, and as the Swiss franc became less attractive as a safe haven vs others because of its negative yield.
Unless bond yields dramatically revert its current momentum, this rally in USD/CHF is likely to continue in the short-to-medium term, but we may see some choppiness with the latest update on U.S. employment from the U.S. government tomorrow.
Expectations are that February’s report could be an improvement from January’s, based on the most recent updates from leading indicators like Markit and ISM business sentiment updates. This could be a boost for USD/CHF depending on the outcome.
So, with expectations of the Dollar outpacing the franc for now, we’re watching USD/CHF for a long setup. For a better potential return-on-risk, look out for a pullback to the 0.9150 minor psychological area. This reaction may occur if we see a “buy-the-rumor, sell-the-news” scenario play out where the NFP numbers are good and short-term traders take profits on their USD longs. We also see bearish divergence on the one hour chart above that could drive technical traders to take some profits as well.
If the NFP report disappoints, that could be a driver for a USD/CHF retracement as well, but in this scenario, we’ll be watching for a retest of the 0.9150 area and bullish reversal patterns before considering putting together a long idea. If support doesn’t form, that could draw in more technical selling.
What do you guys think? Is USD/CHF a buy now or are you waiting for the NFP numbers? Or is there something we missed that has you ready to sell now?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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