The USD/CHF pair rose quite strongly during the session on Monday as the pair bounced from the 61.8 % retracement of the most recent bullish run. The pair is being worked to the upside by proxy, as in the Swiss National Bank's minimum acceptable exchange rate in the EUR/CHF at the 1.20 handle. While this doesn't directly affect this pair, it does put the specter of a central bank intervention in the markets.
The pair bounced to the 0.90 level, and this area held the market down just a bit at the top of the range. This of course makes sense as the large round number and its psychological effect comes into play. The bounce isn't really confirmed until we see the top of the Monday session eclipsed. The move would suggest that we are going to return to the 50% retracement area, just under the 0.91 level - an area that was very supportive in the past.
The Swiss economy will also be affected by the damage in the European Union as the area will more than likely see recession. The Swiss send over 80% of their exports to the area, and as a result they will find their economy falling right along with the Europeans. The Franc will certainly move with the Swiss economy, and we think it is only a matter of time before we see the economic announcements showing this problem. When your biggest customer is broke, it is difficult to run a strong business. The Swiss are about to get a great lesson in this.
The pair has been relentlessly sold off since the start of the year, but the fact is that the Swiss will not let the Franc appreciate too much. While it is the EUR/CHF pair they are watching, the fact is that an intervention in that pair will certainly push this pair up as well. Because of this, we can't sell at this point as the EUR/CHF is at about the 1.2050 level.
The pair can be bought on signs of support, and we will buy a break of the top of the Monday session highs. A supportive candle could also be used at this level as well. Otherwise, we won't be involved at all.
USD/CHF Forecast February 28, 2012, Technical Analysis
USD/CHF Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3