Swissie suffers as risk returns, euro breaks resistance

The euro tops the performance charts at the start of U.S. trade as risk appetite returns to markets after last week’s volatile trade. The dollar has gone on the defensive across the board as traders seek yields amid optimism that the US will be able to avert another slide into recession. The euro broke above the convergence of the 1.4340 resistance level and trendline resistance dating back to July 26th before testing the 1.4380 level. Topside resistance stands at 1.4220 backed by 1.4450 and 1.4485. Interim support now rests at 1.4340 with subsequent floors seen lower at the 23.6% Fibonacci extension taken from the July 26th and August 5th crests at 1.4310, 1.4280 and the 38.2% extension at 1.4240. Overnight traders will be eyeing the economic docket with German and Eurozone GDP figures on tap. Both are expected to ease significantly, confirming speculation of further weakness in the global economy. A weaker than expected print could see risk sentiment go back on the defensive as traders scale back exposure on fears that the recovery in Europe could be faltering.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

1.4312

20-Day SMA

1.4293

10-Day SMA

1.4250

2011 EUR High

1.4939

The swissie is the worst performer against the greenback for the third consecutive session as the threat of a temporary peg against the euro continues to weigh on the franc. The USD/CHF pair encountered resistance at the 76.4% Fibonacci retracement taken from the July 19th descent at the 0.80-figure before finding solace just above the 61.8% retracement at 0.7814. The swissie has remained under pressure since last week when SNB Vice President Thomas Jordan suggested policy makers were considering a peg to the euro as a means to stem the currencies rapid appreciation. The USD/CHF held an ascending channel formation since the announcement and looks to continue to move higher as traders are reluctant to take positions against the central bank. A break above interim support at the 0.80-handle eyes topside targets at 0.8050, 0.8070, and 0.8120. Interim support holds at the 61.8% retracement with subsequent floors seen at 0.7750, and the convergence of channel trendline support and the 50% retracement at 0.7670. An unlikely break here, eyes the 38.2% retracement at 0.7530. With no data on the Swiss calendar, price action will largely be dictated by risk sentiment as traders lend a keen ear to any remarks coming out of the Swiss National Bank with regards to a possible move on the franc.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.8147

20-Day SMA

0.7818

10-Day SMA

07582

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.

Twitter: @MBForex
WEB: www.DailyFX.com

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