Bottom line: USDCHF short term outlook remains bearish against 0.9800 resistance. The triangle consolidation seems to be complete at 0.9784 and bears remain poised to push towards 0.9450 interim support. A break below 96.00 will accelerate.

Fundamental Outlook:

USDCHF has come under pressure since May 25, and it has dropped to 0.9630, losing over a 100 pips. The US Dollar weakness can be largely attributed to risk sentiment and equity markets that continued to rally yesterday. The SPX500 touched 3068 while Dow Jones peaked towards 25758, highest since early March 2020.

Adding further to the positive sentiment, the EU Commission also announced on the recovery funds earlier this week. Over and above the EURO 500 billion jointly proposed by Germany and France, an additional EURO 250 billion in loans exceeded market expectations.

All said and done, the US-China tensions over Hong Kong cannot be ignored. Later today, President Trump holds a press conference to brief an administrative response to China’s decision on tightening its grip over Hong Kong.

Furthermore, the US Job Market continues to worsen, as over 40 million Americans have lost their jobs since the COVID-19 epidemic broke out. A looming recession is inevitable and its impact worse than The Great Depression (1929)!

Technical Analysis:

USDCHF might have completed its triangle consolidation around 0.9785 levels on May 07, 2020 as bears prepare to break lower towards 0.9450. The consolidation support was seen around 0.9600 mark and a break would accelerate towards 0.9450 before USDCHF finds support.

USDCHF had earlier rallied from 0.9150 through 0.9900 levels, producing an impulse. The upswing is being retraced and high probability remains for a drop toward fibonacci 0.618 levels at 0.9450. Once the corrective drop is complete, USDCHF should be on its way towards 1.0027 levels.

USDCHF remains bearish in the immediate short term, while the medium term outlook remains constructive for bulls. Only if prices break below 0.9300 levels, it would be a threat to 0.9150 going forward. Traders might want to remain short, with protective stop above 0.9800 and projected target towards 0.9450 for now.

Prepared by

Harsh Japee, Technical Analyst.

USDCHF Chart

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