Swissie falls after talks of pegging it to euro

A surge in risk appetite saw the battered Aussie well supported an hour into US trade with the AUD/USD pair climbing 0.63% early in the session. News that German Chancellor Angela Merkel and French President Nicolas Sarkozy had set a meeting on August 16 to discuss Eurozone economic management temporarily eased concerns of contagion which rattled French markets this week. Coupled with a slightly better-than-expected weekly jobless claims report, traders saw scope to once again take on risk with the high yielding Aussie the primary beneficiary of improved appetite. The AUD/USD pair continues to hold below interim resistance at the 1.0240 level with subsequent ceilings eyed at 1.0310 and the 38.2% Fibonacci retracement taken from the August 1st decline at 1.0360. Support holds just below the 23.6% retracement at 1.0180 backed by 1.0125 and 1.0700.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

1.0658

20-Day SMA

1.0680

10-Day SMA

1.0535

2011 AUD High

1.1079

The swissie plummeted early in North American trade after Swiss National Bank VP Thomas Jordan cited that the central bank was prepared to consider temporarily pegging the nations “massively overvalued” currency to the euro in an attempt to stem the currencies rapid appreciation. The franc, which hit a record high against the euro at 1.0075 earlier in the week, has surged more than 30% against the single currency over the past year as traders sought refuge amid the turmoil of the European sovereign debt crisis. The swissie plummeted more than 5% against the dollar as traders jettisoned the safety of the franc while simultaneously moving into higher yielding, growth linked assets. The franc is likely to remain under pressure on the prospect of a possible pegging to the euro, noting interim resistance at 0.7680 backed closely by the 0.77- figure. A topside break eyes targets higher at the 50% Fibonacci retracement taken from the July 8th decline at 0.7790 and 0.7850. Support rests at the 23.6% retracement at 0.7410 followed by 0.7365, the 0.73-handle, and 0.7250.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.8175

20-Day SMA

0.7855

10-Day SMA

0.7596

2011 CHF High

0.7069

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
WEB:
www.fxcm.com

About the Author
Michael Boutros Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.
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