Swiss franc rebound to accelerate, loonie at risk

The swissie surged early in North American trade, advancing nearly 0.80% against the greenback. At a press conference today, the Swiss Government cited that it planned on increasing the amount of liquidity in the markets in an attempt to ease the currency’s rapid appreciation. However the franc quickly advanced as concerns over a possible peg to the euro eased, boosting demand for the swissie which topped the performance charts against the dollar mid-day in New York. The Swiss franc is likely to pare some of the steep losses seen after SNB Vice President Thomas Jordan announced the peg threat which in our opinion was a form of ‘verbal intervention.’ However traders are likely to remain reluctant to lift the swissie too high too quickly as further appreciation in the franc is likely to test the central bank’s resolve. The USD/CHF pair continues to range between the 61.8% and 76.4% Fibonacci retracement taken from the July 19th descent. Interim support rests with the 61.8% retracement at 0.7815, backed by 0.7740, and the 50% retracement at 0.7670. Topside resistance is eyed at the 0.80-figure with subsequent ceilings seen higher at 0.8050 and 0.8080.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.8133

20-Day SMA

0.7790

10-Day SMA

0.7636

2011 CHF High

0.7078

The loonie remained the worst performing currency against the weaker greenback into the late afternoon hours after disappointing economic data this morning weighed on demand for the Canadian dollar. June international securities transactions plummeted with a print of -3.46B, missing calls for a read of 10.0B Canadian dollars. The print marks the first contraction in international demand for Canadian securities since March and the lowest read since the financial crisis back in November of 2008. The USD/CAD pair continues to trade within a descending channel formation with recent price action straddling the 38.2% Fibonacci extension taken from the June 27th and August 8th crests just above the 0.98-figure. A break below interim support at 0.9775 sees subsequent floors seen at the 50% extension at 0.9750 and the 76.4% extension at 0.9615. Topside resistance holds with upper bound trendline resistance of the descending channel, with a breech eyeing targets at the 23.6% Fibonacci extension at 0.9880, the 0.99-figure, and 0.9950. Investors will continue to eye the Canadian economic docket, with July leading indicators and June wholesale sales on tap for tomorrow.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.9682

20-Day SMA

0.9678

10-Day SMA

0.9840

2011 CAD High

0.9456

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

Twitter: @MBForex
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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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